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MetaSource

18Sep

Top 10 Servicing QC Findings for 2021

September 18, 2022 MetaSource Residential

Document challenges continued to be a leading cause of QC trouble for mortgage servicers in 2021, a year in which record high mortgage levels exacerbated the effects of process shortcomings.

It was a problem that left servicers unable to substantiate a wide array of process requirements, from documenting timely follow-ups to customer inquiries to missing disclosures on service transfer letters. In fact, documentation lapses made up 9 of the top 10 findings identified in MetaSource’s annual analysis of servicing QC findings.

This findings report discusses what the top 10 findings were, why documentation remains a main source of difficulty, and how to overcome document challenges and ensure compliance.

Document Management: A “Daunting Task” for Mortgage Servicers
Our 2021 analysis shows that missing documents left servicers unable to provide proof that they met requirements. In many cases, servicers’ underlying processes were fully compliant, but the supporting records were insufficient or inaccessible at the time of the audit.

Why was this the case? MetaSource’s QC Manager John Morales said it best. “Establishing and maintaining adequate document management processes can be a daunting task,” he said.

In some cases, Morales said, the documents required to substantiate compliance were notated in the servicer’s records, but the original document image, which can be difficult to retrieve, was not available at the loan level.

According to Morales, many servicers relied on notations and codes as proof that requirements were met. Unfortunately, this led to negative outcomes.

“Reliance on codes and notations alone to substantiate work completed can open the door to findings where a conservative interpretation of a guideline requires physical proof of the underlying document,” Morales said.

For example, customer inquiry receipt dates are considered questionable when sent without a date stamp. The same is true for electronically provided payment receipt dates and notations of sent breaches when copies aren’t available.

In other cases, mandatory documents were retrieved and stored but were purged after a liquidation or service transfer before audits were submitted for review. This, too, resulted in a lack of required documentation and, therefore, findings.

Top Servicing QC Findings for 2021

Here is the list of our top mortgage servicing QC findings for 2021:

  1. Incorrect set-up and timely premium payment of taxes, insurance, and mortgage
    insurance
  2. Failure to provide proof of payment within 24 hours of receipt due to
    inability to prove receipt date via various methods of payment acceptance (e.g.,
    online, phone, and lockbox)
  3. Missing accounting histories where initial loan set-ups are completed after the first
    payment was submitted and now second payment is due.Download the full report to see the complete list of top servicing QC findings, learn why overcoming document shortcomings is more important than ever, and discover how to ensure compliance in 2022.
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29Jun

2021 MERS QA Findings Report

June 29, 2022 MetaSource Residential

Staff shortages, office closings, and high volumes created ongoing disruption for the mortgage industry in 2021.

And, based on MetaSource’s annual analysis of third-party QA reviews, some MERS processes suffered as a result.  

Overall, our analysis showed that the top three areas of MERS compliance challenges fell along familiar themes. We also discovered that while the overall exception rate increased from 11% in 2020 to 19% in 2021, some notable improvements were made.

This report discusses why these improvements occurred, details surrounding what MERS Members struggled with the most, and best practices for overcoming these struggles in the future.

Top MERS QA Audit Findings for 2021

Here are the MERS QA challenges that Members struggled with most in 2021:

Rank
Finding
1. Written internal policies and procedures were missing or did not contain enough detail to ensure compliance with the most recent MERS requirements
2. Failure to conduct monthly or quarterly data reconciliation based on requirements and volume
3. Failure to properly manage/monitor internal audits, subservicer, or third-party vendor through reporting of QC reviews to confirm MERS standards are met

The Challenges of Maintaining Detailed, Up-to-Date Policies & Procedures

Ensuring that internal policies are thorough and up-to-date is a perennial struggle for many MERS Members. But it was heightened in 2021 when additional difficulties, including staffing shortages, left some servicers without the MERS support they needed. Many servicers were left to rely on staff members who were unfamiliar with MERS requirements and the level of detail necessary to meet current policy and procedure expectations.

Other servicers fell short of MERS requirements for written policies and procedures as their monthly volumes swelled and, for the first time ever, pushed them over the 1,000-mortgage identification number (MIN) mark. MERS Members over this MIN mark as of March 31 are required to obtain a third-party review, which includes a thorough review of MERS Members’ operational policies and procedures in preparation for the MERS eAnnual report due each year by December 31. Those new to this MIN volume level last year were left subject to monthly reconciliation requirements and third-party reviews for the first time. Similar to those experiencing staffing shortages, these servicers were unfamiliar with the requirements and failed to provide adequate written internal policies and procedures.

This unfamiliarity undoubtedly led to an increase in policy and procedure-related challenges and a rise in the overall exception rate. “About 90% of the Members I reviewed last year did not have detailed procedures,” said Rachel Pylant, MetaSource Director of MERS Services.

The Areas that Showed Improvement

While more Members struggled to meet written internal policy and procedure requirements last year, there were signs of improvement in other areas.

Download the full report to learn what these areas of improvement were, the main reasons for the improvements, and the best practices for ensuring MERS compliance in 2022.

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02Mar

Top 15 Mortgage QC Findings for 2021

March 2, 2022 MetaSource Residential

In a year in which record mortgage volumes collided with staffing shortages and ongoing economic volatility, mortgage quality control difficulties remained mostly the same as years prior. However, there were some new challenges in 2021.

This findings report digs into those new challenges, provides MetaSource’s top 15 findings for the year, and offers advice on how you can avoid findings in 2022.

Top QC Findings for 2021

Here is the complete list of our top 15 mortgage QC findings for 2021, including all loan types and both regulatory and agency findings:

Rank
Finding
1
Closing Disclosure – Defective – Tolerance
2
Closing Disclosure – Defective
3
Income Documentation – Aged
4
Closing Disclosure – Defective – Calculating Cash to Close
5
Other Application/Processing Documentation – Intent to Proceed
6
Product Parameter – Points & Fees
7
Other Application/Processing Documentation – Loan Estimate – Timing Violation
8
Income Not Documented – Other
9
Closing Disclosure – Timing Violation
10
Insufficient Assets to Close
11
DU or AUS Findings Report – Missing or Defective
12
Incorrect Income Calculation – Other
13
Property Insurance Policy Not Documented – Missing or Defective
14
Other
15
Other Application/Processing Documentation – Case Number Assignment – Missing or Defective

#1 Finding: Still a Continuous Trend

The finding “closing disclosure tolerance defects” tops the list, as it has in five of the last six years. Even so, there were signs of a worsening trend in 2021, claiming over 15% of all MetaSource significant findings, compared to around 13% in 2020.

Why is this the case?

MetaSource Senior Director of Mortgage Services, Brady Meadows provided some insight: “As best we can tell, this is because lenders were so busy trying to keep up in 2021, that documentation took a back seat.” Meadows explained that many lenders did not fail to adhere to tolerance regulations, but rather failed to provide MetaSource with the required documentation.

Documentation issues were also prevalent in MetaSource’s analysis of top findings by Fannie Mae category. Loan package documentation was by far the largest Fannie Mae category of defects, accounting for more than 60% of the findings.

MetaSource 2021 Mortgage QC Findings

Income Documentation: A Source of Difficulty for Lenders in 2021

There was a steep increase in the number of income documentation aged defects, with 43% more significant findings related to documenting borrower incomes than in the previous year – pushing income documentation defects to 3rd in ranking in 2021, up from 10th on our 2020 list.

Download the full report to learn why this increase occurred, what other findings moved up the list in 2021, and how you can minimize findings in 2022.

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17Mar

Top 15 Mortgage QC Findings for 2020

March 17, 2021 MetaSource Residential

While very little about 2020 was predictable, it was a year in which mortgage quality control issues fell into a familiar pattern. This findings report includes MetaSource’s top 15 findings along with a deep dive into our #1 finding and best practices for avoiding it.

Top QC Findings for 2020

Here is the complete list of our top findings for 2020, including all loan types and both regulatory and agency findings:

Rank       Finding
1.            Closing Disclosure – Tolerance Violation
2.            Closing Disclosure – Calculation Cash to Close
3.            Closing Disclosure – Defective
4.            Closing Disclosure Timing Violation
5.            Other Application/Processing Documentation – Intent to Proceed
6.            Income not Documented
7.            Other Application/ Processing Documentation – Loan Estimate – Timing Violation
8.           Product Parameter Points and Fees
9.           Insufficient Assets to Close
10.         Income Documentation – Aged
11.         DU or AUS Findings Report – Missing or Defective
12.         Incorrect Income Calculation
13.         Security Instrument – Missing or Defective
14.         Closing/Title Documentation – Closing Disclosure – Defective
15.         Note – Missing or Defective

#1 Finding: A Continuous Trend

Closing disclosure defects remain lodged firmly in the top five of our annual QC findings, where they have put down roots every year since TRID Rules took effect more than five years ago.

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30Oct

TRID Turns 5: What We’ve Learned About Successfully Managing Mortgage Origination Compliance

October 30, 2020 MetaSource Residential
MetaSource

Five years ago, big changes to federal requirements for the mortgage loan disclosure processes produced great anxiety in the lending world. Lenders feared they were facing an onslaught of complicated, new compliance demands that would inflate the cost and risks of every loan origination and leave them perpetually at risk of penalties.

The TILA- RESPA Integrated Disclosure (TRID) rules were instituted in late 2015 and administered by the Consumer Financial Protection Bureau. TRID consolidated four existing disclosures required under TILA and RESPA for closed-end credit transactions secured by real property into two forms:

  • The Loan Estimate (LE) replaced the Good Faith Estimate (GFE) and initial Truth-in-Lending Disclosure, which are provided to consumers at the start of the transaction and include both initial disclosures and timing restrictions (must be provided within 3 business days from the date the application is received)
  • The Closing Disclosure (CD) replaced the HUD-1 Settlement Statement and final Truth-in-Lending Disclosure, providing consumers the required 3 days to review all final terms and conditions and seeking to prevent borrowers from signing documents under duress

Lenders’ anxiety around these new rules was based on the lack of clear guidance from the CFPB, the myriad interpretations by varying investors, and potential penalties associated with non-compliance.

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