Closing Disclosures Continue to Cause Mortgage QC Trouble

A study from MetaSource, Salt Lake City, said closing disclosures and other requirements imposed by the Consumer Financial Protection Bureau’s late 2015 enhanced disclosure rules continue to pose quality control challenges.

While closing disclosures took up fewer spots on the list in 2018 than in 2017, the number of significant regulatory findings remained remarkably consistent in 2018, despite the fact that fewer mortgages meant a decrease in the number of audits.

The results show that the same three closing disclosure issues that gave lenders the most trouble in 2017 continued to pose difficulty in 2018: Tolerance Violation; Calculating Cash-to-Close; and Timing Violations. It also found incorrect income calculation, missing or defective employment verification and insufficient assets to close to be the highest-ranked, non-regulatory QC issues in 2018.

Brady Meadows, Senior Director of Mortgage Services for MetaSource, said the results indicate documentation problems in a wide array of areas that also included missing or defective intent to proceed and settlement service provider lists.

“Some of the findings are likely the result of inadequate processes for document management and version control, and not confusion over the now three-year-old regulatory changes,” Meadows said. For example, “Despite everyone’s understanding of TRID and efforts to correct for it, we’re not seeing the decrease in findings we should be seeing,” he said. “It appears the rush to execute volume is superseding effective document and process management.”

Meadows noted too many redisclosures can lead to QC errors. “There are often excessive versions of loan estimates and closing disclosures in mortgage files,” he said. “This creates errors and difficulty determining the sequence of the issued documents and which is the most recent.”

A better practice, Meadows said, is to create a clear record of the sequence of the documents issued and to not issue more disclosures than is needed. The goal, he said, is to create an easy-to-follow record of how you got to the final version. “Think about a regulatory agency digging through your files and what would be the clearest way to present how these documents were issued,” he said.