Op-Ed: Quality Control Resolutions for 2016

(Phil McCall is COO of web-based mortgage quality control and audit technology ACES Risk Management Corp. The company’s website ishttp://www.armco.us/.)  

As the end of the year approaches, many people start considering what personal resolutions they’re going to make to better themselves in the coming year. For quality control professionals, now may also be the time to decide the needed changes to improve loan quality in 2016. Here are a few recommendations to help get you started.  

In 2016 our organization is going to:  

1. Get Organized.

Now is the time to get your QC house in order. The key to any successful organization project is to have the proper systems in place.  

Far too many lenders are still relying on general office software, like Excel and Outlook, to manage QC reviews and activities. Not only are these systems not designed to handle QC-specific activities, but they can also create enormous inefficiencies because of the manual labor required to make these systems work in a QC environment. Investment in software designed specifically to manage QC reviews, workflow and facilitate communication between areas of responsibility is going to pay off in the long run in terms of improved loan quality and gains in efficiency and productivity. 

2. Lose That Extra Weight (i.e., Gross Loan Defects)                   

Gross loan defects are the extra weight that prevent lenders from being the best, healthiest version of themselves. Tackling loan defects is a lot like losing weight. It can be a long process and requires significant lifestyle changes in order to maintain long-term results.   The key to success is setting a goal. In QC terms, this means setting a target gross defect rate. Because there is a cost associated with any loan defect, your target defect rates should always include the level of financial risk your organization is willing to accept. While zero sounds like the goal everyone should be striving for, the reality is that mistakes are going to happen, as mortgage lending is a highly complex process involving fallible individuals. As the majority of gross defects are directly associated with flaws in the manufacturing process, identifying the root cause of these process breakdowns will be the key to driving your gross defects down to your target gross defect weight.  

3. Save More Money and Spend Smarter

Money is synonymous with resources; any QC professional can tell you that resources are always in high demand. In an ideal scenario, QC professionals would be able to audit 100 percent of all loans both pre- and post-funding, but that is not practical given the staffing requirements needed to pull off that kind of endeavor.  

However, by committing to Resolution No. 1 outlined above, QC professionals can increase the number of files being audited without significantly increasing staffing. Using intelligent automation that provides a system-driven process with template-driven customization allows QC departments to prioritize resources based on need for expertise and not merely volume. Thus, making smarter use of resources not only saves lenders money, but it also opens up financial resources for investment in areas where improvement is needed.

4. Learn Something New. 

Speaking of resources, QC staff can never have enough training. It can be easy in periods of high volume to neglect this critical area. However, training is crucial to keeping staff aware of changes to regulations, eligibility for loan programs and investor requirements.  

Commit yourself and your organization to a written training plan for 2016. With all the changes that have occurred the past 18 months and all proposed changes, this dedication to a training plan will help secure the foundation of your organization.  

5. Stop Making Resolutions

Instead of resolving year after year to make changes, actually make change happen. Resolutions always start with the best of intentions, but follow through often wanes as the year gets underway. Commit your organization to making these necessary changes in order to improve loan quality, as well as profitability. In other words, have a little less talk and a lot more action.  

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor does it connote an endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions; articles and/or Q/A inquiries should be sent to Mike Sorohan, editor, at msorohan@mortgagebankers.org.)