Does your servicing strategy prevent loan defects?
Mortgage Servicing is a remarkable business model, typically operating on thin margins with cumbersome regulatory oversight. As a segment of the industry that has experienced radical change over the past decade, servicers continue to navigate unexpected industry circumstances. Currently grappling with a rapidly rising interest rate market and yet another record-breaking storm season, mortgage servicing is facing unique challenges that are accentuating loan defects and placing strain on loss mitigation options. This is a storm unto itself, adding duress for lenders, servicers and homeowners, additionally creating a scenario that demands operational diligence, cautiousness through quality control and audit, as well as a keen servicing strategy.
The QC Verify team has been a part of the evolving mortgage landscape for decades, providing solutions that are specific to our clients’ needs, not just industry demands. As the latest challenges develop, QC Verify stands ready to help servicers where we see common defect findings in various areas of your business, so you can prepare for today’s challenges and tomorrow’s.
Servicing Transfers Errors
The rate of servicing transfers continues to rise. As surging interest rates place pressure on homeowners in a number of areas, from the increasing cost of home insurance, escalating property taxes, and higher home maintenance costs, the last thing a borrower is prepared for is having their servicing transferred. The result is an increase in reported account issues and a decrease in customer satisfaction.
This situation is exacerbated by the defects that arise during this phase of servicing. QC Verify focuses on defect identification and prevention, working with servicers to develop audits and education as a framework for servicing strategy. The primary repetitive defects that are found include, but are not limited to:
· Defect – Lack of responsiveness, consistency, and accuracy when communicating with borrowers during servicing transfer.
o Solution – Audit communication and documentation timelines, as well as evaluate verbiage used as a part of call scripting and written communications. Provide education to improve consistency.
· Defect – Incomplete and inaccurate servicing transfer disclosure documents.
o Solution – Add an additional layer of review to current disclosure documents. Audit for compliance, exceptions, and inaccuracies. Use results as educational tools.
· Defect – Required custodial documents are missing from borrower files.
o Solution – Develop pre-boarding as well as post onboarding document checks, using preemptive auditing and rigorous follow up processes to secure missing documents.
Disaster Recovery and Relief Defects
Surging natural disaster events plague mortgage servicers, calling for scalable and compliant responsiveness, with little to no warning. This is a scenario that is ripe for defects, and although automation has made a tremendous impact on servicer capabilities, defects continue to rise.
QC Verify works with servicers to push beyond defect identification, helping to develop strategic, yet compliant, means for addressing vulnerabilities. By using comprehensive automated auditing coupled with industry quality control expertise, QC Verify develops personalized approaches to preventing the following defects that occur during disaster relief:
· Defect – Forced Placed Insurance coverage is not appropriately documented.
o Solution – Insert additional exception auditing that comprehensively reconciles payment lapses, helping ensure Forced Placed coverage is applied when and how it is intended.
· Defect – Property damages and corresponding claims are not handled in a thorough, accurate, and responsive manner.
o Solution – Tracking property damage claims can be extremely complex as your distressed borrowers work with third parties for relief. Servicers need to ensure the collateral is maintained and claims are received, processed, and appropriately applied by the homeowner. Extensive, sophisticated verification and audit services are vital to this effort.
Delays in Loan Modification Processing
The recent soar in interest rates has a very real impact on loan modification options. With many homeowners already struggling to keep payments current amidst the rising cost of insurance, taxes, and maintenance, there may be a greater threat on the horizon. Once homeowners become delinquent, their eligibility for affordable loss mitigation and modification options can be severely hampered by higher interest rates.
Although we can’t change interest rates, QC Verify can help minimize risk and peripheral defects that occur during loss mitigation, as well as throughout the servicing lifecycle. Curent quality control and audit findings have highlighted the following defect areas:
· Defect – A consistent lack of required communication when responding to delinquent
o Solution – The most important criteria is communicating in a timely and thorough manner. Auditing activities, event timelines and documentation/data content will significantly reduce and prevent defects.
Defects that can occur at multiple stages of the servicing lifecycle can often be readily avoided simply because they’re occurring repetitively throughout your processes. QC Verify designs quality control and audit services that are easily replicated, meet state, federal, and agency requirements, and also support your proprietary processes, servicing strategy, as well as help prevent the following:
· Defect – Occupancy inspections are not conducted in accordance with servicing guidelines and have become a huge area for fraud perpetration.
o Solution – Ensuring occupancy can be augmented by more rigorous verification and audit. This is critical especially as post COVID guidelines continue to offer little to no option for onsite verification.
· Defect – Tax due dates are frequently inaccurate due to errors in geographic location and/or absence of secondary tax localities that apply to the property.
o Solution – Ensuring accurate supporting tax data is not difficult but requires added diligence and education that is crosschecked using sophisticated audit and expert quality control.
Closing our Servicing Blog Series
Our servicing series has been an opportunity for QC Verify to highlight the relevant benefits that we offer for mortgage servicers, as well as showcase our expertise in this area. We hope that you will take a moment and checkout the preceding blogs in our series where we have explored servicing in general, Fannie Mae and Freddie Mac updates, Federal Housing Administration (FHA) updates, and CFPB guidance for mortgage servicers. QC Verify continues to build its servicing offering on the framework that has made our origination, pre-funding, and post closing quality control and audit services valuable to our clients. Our focus is to deliver specialized consultative solutions that augment and improve your audit and quality control practices. We offer a unique, client-focused approach that is driven by proven experience and modern innovation.
It is time to realize the difference that a personalized QC provider can make in your organization. Visit QCVerify.com to experience sophisticated technology with a human touch.