Avi Naider is chairman and chief executive officer of ACES Risk Management Corp. (ARMCO).
Avi Naider is chairman and chief executive officer of ACES Risk Management Corp. (ARMCO).

The Qualified Mortgage rule, as well as increased scrutiny and more frequent auditing by regulatory agencies, has required lenders to embrace quality control to a far greater degree.

Lenders can stay competitive and keep pace with changing regulations by implementing an automated quality control and loan audit review process. Automating through a quality control platform can significantly reduce cost, and — just as importantly — improve overall loan quality, illuminate business advantages and increase profitability.

The downside to a mandatory commitment to quality is that lenders are required to spend more to ensure loan quality and compliance, and with loan volumes being what they are, that increased cost can be hard to swallow.

Many quality control professionals in particular are feeling overwhelmed and unsure of changing regulations, as well as frustrated with the limitations current QC processes present.

Manually auditing loan files to ensure compliance with state and Federal regulations program guidelines — not to mention proprietary requirements specific to the organization — is laborious, to say the least. Furthermore, ensuring that QC personnel are always working with the most current information is a full-time job in itself.

QC managers can streamline this process and keep staff informed of all regulatory changes through automation, which facilitates better inter-organizational and third-party communication. In a manual quality control or loan audit review process, exceptions typically aren't addressed until the end of the month when management reviews the results.

When loan auditors and areas of responsibility are able to communicate in real time, the net effect is that critical exceptions can be discovered and relayed immediately.

An automated QC or loan audit platform also enables the lender to continually track the execution of rebuttal processes and report deficiencies as they occur. Thus, the lender can continually recalibrate their internal process to improve loan quality on an ongoing basis.

Automation can enhance your reporting capabilities. No two lenders are built alike, and as such, there are no two QC processes that are alike. Therefore, it makes sense that QC or loan audit reports should be designed according to the needs of the organization and its executives.

One of the many great things about an automated quality control platform is the ability to create customized reports, with the support of advanced visualization tools, by importing data directly from its system of record.

When it comes to importing data, automated QC enables integration with and connectivity between third-party systems and service providers.

Executing requests for credit information, field in-depth reviews or borrower re-verifications can all be streamlined through integrations with an automated QC system.

Additionally, the ability to convert data from any format and to have data transfer continuously between systems maintains the integrity of the loan data and keeps turn times to between 24 and 48 hours, which is critical for prefunding.

When evaluating quality control systems, do not underestimate the benefits of a web-based system that is hosted and maintained by a vendor.

This type of system is a mission-critical tool for many lenders, and the ability to access the system remotely can make a huge difference in keeping operations going from a business continuity perspective. In addition, vendors are in a far better position to update and maintain systems on their own servers — not to mention eliminating the potential IT cost to the lender to host (and troubleshoot, if necessary) the system internally.

Furthermore, lenders should be able to take advantage of their quality control software vendor's experience across a wide range of lenders to identify areas of QC process improvement.

Benchmarking against industry peers plays a key role in a lender's ability to understand the quality of its loans and make data-driven business decisions. The QC vendor should be able to provide standardized and normalized results, as lender quality control reporting and classifications can vary.

Lenders are faced with multiple business pressures and quality control is one of the largest. An automated QC platform should be able to create a flexible environment that can accommodate a lender's proprietary requirements and preferences and enable their competitive strategies to drive real-world results.

Avi Naider is chairman and chief executive officer of ACES Risk Management Corp. (ARMCO).