Be prepared for Freddie Mac and the Federal Housing Administration to come out with their own loan quality initiatives, said the head of SigniaDocs at the Mortgage Bankers Association’s annual convention in Atlanta.
Paul Anselmo, chief executive of SigniaDocs, said there are more tools available to help in the compliance function compared with two years ago.
But avoid redundancy when choosing vendors, he advised. There will be benefits to using third-party firms, including a lower risk of repurchase. In the future, Anselmo said, that would lead to better secondary market loan pricing. Investors will be able to purchase the loan quicker.
He believes net worth is overblown. In dealing with an originator, a warehouse lender and/or investor should place a higher value on that lender’s process over its net worth.
Underwriters need to focus on their decisioning skills and not on analyzing loan documents, said Kurt Lofrano, vice president, quality assurance at Wells Fargo Home Mortgage.
“Origination fraud, in my opinion, is becoming much more difficult to commit, but it is much more difficult to detect.”
He said that no matter what you do there will always be loans that default, but companies need to keep the level of defaults within expectations.
To create those expectations, do not focus on loans originated in 2008 or earlier. That vintage is “water under the bridge” and a waste of time, Lofrano said. Review all repurchase requests, mortgage insurance rescissions and investor audits.
Segment out execution errors and control gaps. Create performance monitoring down to the employee level, including scorecards for loan officers. If there’s a problem, the company is able to go back and check where the compliance issue is, he said.
Wells Fargo, Lofrano said, is taking advantage of Fannie Mae, Freddie Mac, Federal Housing Administration, Veterans Affairs and the private mortgage insurers as they come in to do audits.
For the quality assurance side, he explained, these results let Wells Fargo know if it is seeing the same things the secondary market investors are seeing.
Fraud for necessity is rampant in today’s market and the perpetrators are industry insiders, noted Janet Ford, senior vice president, The Work Number.
Brenda Clem, secondary marketing loan delivery manager at Fifth Third Mortgage, said it is essential to keep abreast of the latest news regarding fraud.
It is not just enough to rely on your quality control department, but you need to keep evaluating processes and systems to ensure compliance.
The mortgage industry needs to get beyond finger pointing and fix the problem, said Clem.
The industry relied on MERS to be responsible for all of the documentation used in the home buying process, and as a result no one looked at any of it for a long time, said Becky Walzak, the president and CEO at RJB Walzak Consulting Inc.
She believes judges in special foreclosure courts in Florida got tired of seeing files with missing or incomplete paperwork.
With two class-action suits already filed in two states because of the foreclosure crisis, she said she would not be surprised to see more, during an interview at the conference.
