The Importance of Quality Control for Mortgage Servicing

The mortgage servicing industry plays a crucial role in the overall functioning of the housing finance system. Mortgage servicers are responsible for collecting and processing payments, managing escrow accounts, working with delinquent borrowers on loss mitigation strategies, maintaining accurate records for millions of borrowers across the country, and much more. In order to ensure that mortgage servicers are operating efficiently, effectively, and compliantly in all their procedures, quality control processes must be implemented and maintained.

Here are some questions related to mortgage servicing that we commonly receive from our partners:

What is mortgage servicing and how can it benefit lenders?

Mortgage servicing is the process of collecting mortgage payments from borrowers and managing the various components and stages of the mortgage servicing lifecycle, such as escrow administration, delinquency, loss mitigation, bankruptcy, foreclosure, etc. Mortgage servicing is a complex and highly regulated industry. There are several federal and state laws and regulations that govern the operations of mortgage servicers, including the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), and the Fair Debt Collection Practices Act (FDCPA). In addition, GSEs and agencies have their own mortgage servicing guidelines as well (FNMA, HUD, VA, etc.). Compliance with these guidelines and regulations is critical for mortgage servicers, as failure to comply can result in significant financial penalties and repercussions as well as damage to the company's reputation.

Why is quality control important for mortgage servicing?

An effective quality control program is essential for ensuring that mortgage servicers are operating in compliance with all relevant guidelines, laws, and regulations, and that they are providing high-quality service to borrowers. Loan servicing reviews are a key component of a sound QC plan and program and an important tool for identifying potential issues with mortgage servicing operations. These reviews can be conducted by internal staff and/or by third-party vendors and help to ensure a mortgage servicer's procedures and activities are compliant. A strong quality control program is actively monitored and reported upon to ensure that compliance is maintained, quality standards are met, and corrective action is implemented and functioning as expected.

What are some best practices for quality control in mortgage servicing?

In order to implement and maintain an effective quality control program in the mortgage servicing industry, there are several best practices that organizations should follow. These include:

• Establishing a culture of quality: This involves establishing policies and procedures that prioritize quality and ensuring that all staff are aware of the importance of quality in the organization. A commitment to quality begins at the top of an organization and is a part of their overall mission, vision, and values.
• Conducting regular loan servicing reviews: These reviews and audits should be conducted on a regular basis (generally monthly as well as quarterly) to ensure that mortgage servicing operations are functioning effectively and efficiently. If deficiencies are identified, assess and implement corrective action and re-test to ensure effectiveness.
• Investing in technology: Investing in technology can help mortgage servicers to streamline operations and reduce the risk of errors or compliance issues. In addition, servicing reviews are commonly conducted within the servicing system itself. Having a robust and accessible servicing system will ensure your QC servicing reviews are thorough and accurate.
• Regular training and education: Providing regular training and education to servicing staff is critical for ensuring that they are aware of all relevant guidelines, laws, and regulations, and for keeping them up-to-date on changes in the industry.
• Maintaining strong internal controls: Strong internal controls are essential for ensuring that mortgage servicing operations are functioning effectively and that compliance is maintained. This includes regular monitoring of key processes and procedures through 1^st/2^nd/3^rd level checks, and ongoing reporting to senior management and the board of directors.

Quality control is crucial for the mortgage servicing industry to function effectively and efficiently. An effective quality control program can help to identify potential issues with mortgage servicing operations and ensure that compliance with relevant guidelines, laws, and regulations is maintained. By following best practices and conducting and monitoring regular loan servicing QC reviews, mortgage servicers can minimize risk, improve operations, and ensure they’re providing high-quality service to borrowers.