Post-Closing Quality Control Mortgage Lending

Post-closing quality control (QC) in mortgage lending is a requirement by the government organizations, government-sponsored entities, and investors after a mortgage origination. This calls for detailed, monthly testing “of the loan to assess the accuracy and integrity of the information used to support the lending decision, the documentation of any defects identified through the review, and an assessment as to whether or not the loan complies.” Guidehouse is well-positioned to support originators with their post-closing QC, given our deep understanding of the mortgage business. Our advisory team’s experience, paired with our cost-efficient offshore model and technology enablers, provide a best-in-class solution.

Guidehouse's Matthew Moosariparambil shares his perspective on the mortgage originations space:

Why is post-closing a hot topic right now?

It is a challenging time for originators. As interest rates rise, the volume of loans that originators have is drastically decreasing. Post-closing QC is really a material overhead for most of our clients. Even though the number of closed loans is declining, lenders must still maintain sufficient staff to ensure that the post-QC reporting milestones established by investors are met. This can lead to costly downtime for employees between deadlines – originators need to optimize operational costs. Guidehouse has several innovative ways to help our clients do that with effective, innovative mechanisms focused on cost reduction. That’s why we think it is a great opportunity for us to protect our clients’ interests and let them know how we can help address challenges.

How many clients create value from their QC results? Reviewing their results?

There are multiple ways that they can create value by reviewing their QC results. First, it's a required function for loan origination. You have to perform this because the services require that you do it. Second, it gives you the opportunity to identify errors that your originators are making. This empowers them to change  policies and procedures, as well as in your day-to-day QC, to ensure that those errors are taken out of the system.

What are the most common post-closing QC mistake(s) you're seeing now?

Our team sees post-closing QC mistakes in multiple areas. Here are some examples: 

1. In the income area, we see a lot of errors in income allocation, incorrect averaging of base pay, overtime, and bonus income for hourly employees.
2. In the credit area, we see people not including newly open debt in the debt-to-income ratio.
3. For assets, we’re seeing a lack of documentation for large non-payroll deposits and insufficient documentation to verify the transfer of gift funds.
4. Lastly, from a property perspective, we don't see originators adequately addressing the Submission Summary Report warnings. Often we find that the appraisal report lacks sufficient information to support the analysis and conclusions provided by the appraiser for loans with a risk score greater than three.

I know that your team has tried to help bring down the cost of our post-closing QC service. Have you been able to do this?

Yes, through a multi-pronged approach. First, we enhanced and focused our test plans. We streamline the process to ensure that our testers don't have to bounce from page to page. So, whenever they're on a particular page of a document, they're entering all the data in that document – there are several timesaving shortcuts.

Second, our employees are highly trained, whereas competitors often leverage less seasoned resources. They've been doing post-closing testing for a while, so they're familiar with the documents and the common errors found in loan documentation. We supplement this with job aides and on-the-job training that allows us to optimize our training and deliver more than the next person.

The Guidehouse offshore team has significant mortgage experience, including ongoing post-closing QC engagements. Our lead processing associates have an average of more than five years of mortgage originations experience and significant tenure with Guidehouse.

Guidehouse drives offshore team performance through a mix of factors to ensure a quality client work product. Our experience, both onshore and offshore, combined with industry knowledge, training and professional development model, and ongoing similar work, give us the ability to quickly ramp up to provide quality results.

Our onshore team with 30-plus years of experience in mortgage servicing is available, based on staffing model, to support escalations and subject-matter-related communication.

What are some of the differentiators in your post-closing QC process?

We’ve tested a lot of loans and we share this knowledge with our clients. There are no emails, it's a completely closed system, enabling the client to see direct results and historical information. We have excellent reporting skills, with results that have been optimized and fine-tuned over the past several years. Clients benefit tremendously from our ability to test in multiple regions. We have testers in India, on the West Coast, as well as in the Central Time Zone. We can serve round the clock and optimize the work for our clients so that we are able to return results quickly. Lastly, we have a substantive partnership-like relationship with our clients and flexible to meet their evolving requirements.

This article is co-authored by Sara Laskoski and Sandra Springmeyer-Mozina.