FA Business Services LLC, a subsidiary of First American Corp., is demonstrating QC@Closing, its new, fully automated loan quality product, at its trade show booth during the Mortgage Bankers Association convention. The company said the purpose behind the new product is to help lenders avoid or mitigate loan repurchase risk from the government-sponsored enterprises or other secondary market investors.
It also works to prevent violations of disclosure laws such as the Real Estate Settlement Procedures Act and the Truth-in-Lending Act and correct them before the loan closes, said Pat McLaughlin, the president of First American Title Insurance Co.’s Mortgage Services Division.
QC@Closing is strictly a prefunding review of the HUD-1 settlement statement, not a post-closing one, he said. The value of the product is that every time the HUD-1 is revised, it can be checked to make certain the changes did not inadvertently create a violation of tolerances or other issues. The document can be analyzed to look for fraud red flags. It also checks the HUD-1 against what had been disclosed on the good-faith estimate.
During the transaction the HUD-1 document is revised many times and even can be changed at the closing table. Sometimes the lender doesn’t realize the change breaks the tolerances or even no longer makes the loan compliant with the secondary market purchaser’s guidelines.
Many lenders do a manual review of the loan documents, and in some cases those documents are sent between settlement agent and the lender in PDF form. This kind of review has limited success in reducing buybacks and can be costly and time consuming.
McLaughlin noted that in the large call-center based national lending operations (whose title and settlement needs also come under his oversight), which do mostly refinances, there are an average of 5.5 changes to the HUD-1 during the process.
Its new QC@Closing product conducts an automated evaluation of the HUD-1 settlement statement and loan data, based on user-defined rules, at a point in the closing process at which corrections can still be made. Possible risks and discrepancies are flagged for lenders in real time, so that they can identify and act upon them and not delay the loan closing. McLaughlin added those rule could include proprietary lender guidelines.
Another feature is that QC@Closing stores the actual closing data and results for five years, even after a loan is sold or acquired.
He pointed out that the lender does not have to be using settlement services provided by First American to use QC@Closing; it can be used no matter who the settlement agent is. The product extracts data from the various settlement platforms. The lender can require any changes to the HUD-1 go through the system so the QC@Closing engine can examine it.
If the connectivity between systems is not there and the information is available in only PDF form, the engine can extract the data from that document to make the analysis.
After going through QC@Closing, the lender gets a copy of the revised HUD-1, with the analysis report as an extra page, McLaughlin said.
So a lender is able to use this with all of its closing agents, no matter the level of technologic connectivity. QC@Closing is not currently connected to the various loan origination systems, nor would it have to, he said. HUD-1s are normally moved between settlement agent and lender through e-mail, PDF or by using a third-party vendor management system.
But the company can put an interface into a lender’s LOS or deliver the report in a format their technology processes are used to.
