When we audit a lender's in-house processes our goal is to reduce the risk of something potentially expensive going wrong. Things like being out of compliance in a rapidly changing regulatory landscape; delivering mortgages that don't meet investor requirements; or running a shop that may be vulnerable to mortgage fraud. A successful audit — we call them reviews — saves everybody money by identifying risks before they become liabilities for our lender customers and our shareholders.

Some observers claim that GSE audits are becoming more aggressive and less tolerant. I disagree with that. Freddie Mac's review process remains unchanged in tone and purpose. Reviews are more successful for us and the lender when the process is transparent, open and predictable. Our reviews take between four and five days, which is a lot shorter than the average amount of time most federal regulators or internal auditors typically need.

What is changing is the scope of the reviews. Given the legal and regulatory changes around mortgage lending that have occurred over the past few years, an explanation of when and how Freddie Mac selects lenders to review and what lenders should expect from our reviewers and the review process is necessary to avoid confusion and misunderstanding. (It should be noted that these reviews are separate from Freddie Mac's monthly quality control sampling requests and underwriting reviews.)

Freddie Mac's review selection process is transparent: at the end of the year a list of lenders to be reviewed in the coming year is developed using criteria including mortgage production and servicing volumes, internal referrals from Freddie Mac business groups, and an analysis of a number of performance metrics (like those included in Freddie Mac's Servicer Success Scorecard).

We also consider risk factors like patterns of caution rates, or non-compliance with our guidelines or applicable laws and regulations when deciding who to review and the scope of the review.

Next, we reach out to the lender to discuss the potential scope of the review and to determine which dates work for an on-site visit. Once a date is settled, we provide the customer a request for documentation relative to systems, processes, management reports, and other documentation relevant to the scope of the review. Then, two weeks before the on-site visit, we hold a conference call with the customer's team to get an overview of their business operation and to answer questions about the scope of the upcoming review.

A typical review consists of inquiries, system demonstrations and a walk-through of processes to understand how the customer keeps their operations in compliance with Freddie Mac guidelines. This can sometimes include a demonstration such as showing how underwriters are informed of the latest changes from federal regulators or Freddie Mac, and how the company monitors its operations and loans for compliance to servicing requirements.

Reviewers hold daily debriefing status sessions to give the lender a chance to ask questions and clarify answers. An exit meeting at the end of the review is used to summarize observations, flag findings (if any), and go over next steps. If findings present a risk, the customer is asked to develop a remediation plan, which typically is focused on enhancing customer's processes or controls.

Freddie Mac also offers lenders training, tools and advice to promote effective operational and quality control programs for lenders of all sizes. Everyone committed to maintaining high-quality lending and servicing is encouraged to check them frequently for the latest updates. Our goal is to be transparent and consistent in our reviews and if we are not meeting your expectations, we welcome your feedback.

Chris Mock is vice president of single family quality control and customer eligibility at Freddie Mac.