The latest study from Quality Mortgage Services identifies the leading compliance problems in the mortgage origination process and finds they all happen when
Tommy Duncan, CEO of QMS, said the company continues to notice incomplete borrower information, liabilities not lining up properly against the credit report, no HMDA data, and missing signatures. Although there was some improvement from 2011’s 22.29% to 2012’s 18.19%, mortgage loan officers should exercise more thoroughness in the completion and accuracy of this document, he added.
The second highest compliance problem is in the initial disclosures of the Truth in Lending and good-faith estimate. During the audit process QMS marked loans with errors in fees and missing signatures. Last year it did see improvements with a 16.25% error rate compared to the 2011 19.53% scores.
Duncan said, “Based on this data we conclude that if there are numerous mistakes on the initial 1003, errors will then follow to the initial disclosures.”
The third most seen compliance problem involves missing disclosures required by the FHA and disclosures not prepared properly. “This is worsening as more and more originations are moving to the purchase market and first time homebuyers. As the refinance market reduces and the purchase market returns, more government lending programs will be used. As the initial 1003 and Truth in Lending defects improved from 2011 to 2012, disclosures required by FHA got worse in the same period,” he said. These defects increased to 12.82% in 2012 from 10.87% in 2011.
Overall, he said, regulatory compliance for retail originations improved. “However, the numbers of errors excessively outnumber the errors in the credit risk and valuation side of mortgage banking.
“I do want to congratulate the number of professionals who have taken steps to insure compliance requirements are met and maintained because the industry is showing improvements from previous years,” Duncan concluded.
