There are redundant quality control measures used in the third-party origination process that might be resolved if market participants could overcome compliance concerns and trust issues and agree on a neutral, secure data platform or best practices, according to a recent industry discussion.
“There is a lot of duplicated work” in correspondent channel quality control, Richard Roof, senior vice president, business development, at technology vendor Ellie Mae Inc. told attendees at the Mortgage Bankers Association’s National Secondary Market Conference last month. “It is definitely not as seamless as it could be.
“Many defective loans are still being originated,” he said, speaking as part of a panel on “Trusted Data and QC for the Correspondent Channel.”
“You can let the computer validate much of the data,” he said, suggesting as an alternative.
Roof said this would be a situation where the data does not come from the lender but directly from a neutral source in such a way that it could go directly into an electronic vault.
“People talk about loan manufacturing [improving],” he said, but added that it is “still very inefficient.”
Barry Bier, executive vice president, lending and capital markets, at American Home Mortgage Servicing, said his company started a correspondent channel late last year that has been growing rapidly and that, “We couldn’t agree more that [the process] is still too efficient.”
He said, “We’re generally running a lot of QC tools twice.” Bier said the industry could address the issue by drawing up some best practices in this area. “Most sellers are using similar tools” for at least part of the process, he said.
But Roof said he has found in examining a group of some of the best lenders his company has worked with that practices were “all over the ballpark.” He said, “Generally speaking, the industry is not using a standard set of services.”
Ed Albrigo, managing director of Hilltop Partners, said the government-sponsored enterprises are “setting a standard we can use” if the industry agrees it is appropriate. (Albrigo previously was a senior vice president in Freddie Mac’s operations management group.)
Albrigo suggested the party that “has the money and who has the capital gets to sets the rules” and “aggregators are in a great position to do that.” He said a key challenge to overcoming any of the redundant quality control work is that in “the atmosphere we have now, we don’t trust.”
Pointing to another hurdle, Bier said, “It seems to be that there is a lot of regulation” related to ensuring companies “know” and take some responsibility for the third parties they work with in general, not just for those in an aggregator/originator relationship.
There also can be legal concerns in terms of the sharing of data related to its permissible use, Roof said.
Moderator John Levonick, chief legal and compliance office, Mortgage Cadence, said a lack of communication between operations and legal departments can create complications.
