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FAQ

  1. Why do I need a quality control plan?

    Many investors and agencies, such as FHA, Fannie Mae, and Freddie Mac, require a written quality control plan.* Quality control is also a good business practice because it helps you produce high quality loans and reduce risk of default.

    *(See HUD Handbook 4060.1 chapter 7, Fannie Mae Single Family Selling Guide D1-1-02, Freddie Mac Single-Family Seller/Servicer Guide 48.1)

  2. What am I required to audit?

    To comply with FHA, Fannie Mae, and Freddie Mac quality control guidelines, the general rules are to:

    • Audit 10% of your closed and cancelled/denied loan files
    • Complete the audit within 90 days of closing
    • Audit 100% of EPD loan files (FHA)

    FHA also requires, as part of the overall QC auditing, that a field appraisal review be completed on 10% of the audited closed loan (or 1% of a company’s closed FHA loans).

    *(See HUD Handbook 4060.1 chapter 7, Fannie Mae Single Family Selling Guide D1-1-04, Freddie Mac Single-Family Seller/Servicer Guide 48.4)

  3. How often should I perform quality control audits?

    • FHA guidelines:
      • Audit monthly, if closing more than 15 loans per month
      • Audit quarterly, if closing 15 or fewer loans per month
    • Fannie Mae guidelines:
      • Audit monthly
    • Freddie Mac guidelines:
      • No specified time – every loan must have chance of selection for audit within 90 days of Note Date

    (See HUD 4060.1 7-6B, Fannie Mae Guide D1-1-04, Freddie Mac Guide 48.4)

  4. Who can perform quality control audits?

    5. Quality control audits may be performed in-house, if you establish a unit solely for quality control. The staff must be properly trained, and not be involved in loan production. Alternatively, you may have a third party perform quality control audits, as long as you ensure it meets agency requirements.

    (See HUD 4060.1 7-3B, Fannie Mae Guide D1-1-03, Freddie Mac Guide 48.1-2)

  5. Can my accountant perform quality control audits?

    There is often confusion about the annual financial audit and quality control file audits. They are two separate functions, and you need to do both. Generally your accountant performs the annual financial audit, whereas your compliance department or a third party performs your quality control audits. Many accountants do not have the necessary training or experience to perform quality control file audits.

    (See HUD 4060.1 7-3C, Fannie Mae Guide D1-1-03, Freddie Mac Guide 48.1-2)

  6. Where can I find an updated list of mortgage regulations?

    MCA also offers complete lending manuals for FHA, VA, and HECM. These guides contain quarterly updated requirements in a concise, easy to use format. You can also sign up for our free monthly newsletter, which contains underwriting tips, processing tips, and compliance updates.

  7. What is the Red Flags Rule and how do I comply?

    The Red Flags Rule is essentially an identity theft prevention program required by the Federal Trade Commission, for financial institutions and creditors (including mortgage brokers and lenders).* To comply, you need to have a Red Flag Policy in place by June 1, 2010. You can write your own Red Flag Policy or purchase a custom one. MCA offers a Red Flag template that you can fill out yourself, or we can fill it out for you.

    *(See http://www.ftc.gov/opa/2009/10/redflags.shtm.)

    (The work done by Mortgage Compliance Advisors on your Red Flag Policy does not constitute legal advice. Our intention is provide you with a platform to build a policy specific to your organization. It is a good idea to have your legal counsel review the policy once it has been prepared. Only your attorney can tell you if your red flag policy meets the legal requirements set forth by the Federal Trade Commission.)

  8. How does the audit process work?

    Drag and drop files to our secured server. After you sign up with us, we will send you a username and password to our secured server. Then simply send us a list of your closed loans for the month or quarter, and we will randomly select 10% of those loans for the audit. Once you receive our selection list for the audit, all you need to do is drag and drop the files (PDF or TIF) from your computer to our secured server, and your part is done.

    Files are prepared for audit. Now we upload the files into our proprietary workflow software, which enables us to move every file quickly and efficiently through the process. This helps us maintain our 30 day turnaround from the day we receive your files. Before the audit begins, we prepare everything according to various agency guidelines, such as re-verifying income and employment, ordering a new credit report, etc.

    Auditor reviews the file. Once the files are prepared, an auditor thoroughly reviews each file and makes notes of significant and insignificant findings according to agency guidelines. Our audit checklists are designed to comply with Fannie Mae, Freddie Mac, HUD, and VA guidelines. Because each of our auditors has at least 20 years of mortgage experience, you can be sure to receive accurate and useful management reports from the audits.

    We send you a management report. When the audit is complete, we send you a management report with detailed findings for each loan. If items are found out of compliance, your management should take the necessary actions to correct any issues. When FHA and other agencies conduct an audit, they want to see in writing what actions you have taken to stay in compliance.

    To get started or ask additional questions, click an icon under “Contact Us” to the right or call 877-250-5243.

  9. What documents should I send for the audit?

    Each file that you upload or ship should include the following:

    • Credit/Processing Package (with all initial disclosures and documents)
    • Appraisal
    • AU/Underwriting Package
    • Closing Package (with all final documents including Note, Deed, HUD’s, TIL, Right of Recession, etc.)

    Download our Recommended Stacking Order.

  10. What should I do with the results from my quality control audits?

    When the audit is complete, we send you a management report with detailed findings for each loan. If items are found out of compliance, your management should take the necessary actions to correct any issues. When FHA and other agencies conduct an audit, they want to see in writing what actions you have taken to stay in compliance.

  11. What are your prices?

    Our prices are lower than or comparable to most of our competitors. The cost is calculated on a per file basis; we charge no set up charges, cancellation fees, or monthly fees. To request a price list or more information, click a “Contact Us” button and submit your information or call 877-250-5243.

  12. How do I get started?

    Once we receive a completed client agreement and questionnaire from you, we can start the audit process. To get started or ask additional questions, click an icon under “Contact Us” to the right or call 877-250-5243.

  13. How do I register for the free monthly webinar?

    Click here to register. After registering, you will receive a confirmation email containing information about joining the Webinar. If you are unable to join the webinar or would like to view it again, we will be posting the slides from the webinar on our website under News & Resources.