Whether regulators will conduct audits of lenders' in-house processes is no longer a question but a known fact. In the current climate, lenders cannot underestimate the importance of the standardization and documentation of their quality control process when the regulators come calling. However, preparing for this eventuality need not be yet another item on lenders' ever-growing to-do lists. By implementing a platform designed specifically to support QC, lenders can continuously prepare for an audit while simultaneously executing on everyday loan quality tasks.
The marketplace offers an almost unlimited array of vendor partners to support QC efforts. Vendors can provide any number of systems, services or both to fit a lender's exact needs. However, not all systems are created equally, and there is critical functionality lenders must consider when choosing a QC system to aid in regulatory audit preparation.
Many lenders use tools such as Microsoft Excel and Access to support QC reviews because they are easily accessible and familiar. Unfortunately, as these tools are not designed specifically to support QC, lenders must develop numerous manually-based processes in order to use them for QC reviews. When auditors arrive, and ask to see documentation of the QC review process, it can be difficult to produce this evidence because Excel and Access are not designed to track activity while analyzing data.
For example, communication between analysts and areas of responsibility may be facilitated through a lender's current email system, but most email systems aren't designed to ensure those communications are tracked properly and saved indefinitely. Having analysts and AORs communicate through a QC-specific tool not only ensures that everyone has access to the same information, but it also provides an audit trail for examiners should questions arise.
In addition, the QC review system should accurately tie all AORs together to form comprehensive trending results. Consistent findings and/or early findings will act as a guide in a logical, data-driven path towards appropriate opinion and action.
Bringing data to life with the right analytics tool enables effective reporting both within the QC group and to senior business executives. Static PDF reports limit the ability to interact with the data and interchange components to determine the root causes of defects, rather than simply reporting on findings.
Technology that allows lenders to powerfully visualize results in real time will help them judge and understand the business impact while the actual work is being completed. Clear findings and effective reporting lead to swift and proactive steps to correct or adjust deficiencies in the manufacturing process.
By working smarter with data and producing engaging and illuminating reporting, reviews become more meaningful, prompting positive business change.
When conducting an audit, regulators are keenly concerned with issues in the loan manufacturing process, how those issues are being remediated and the process by which those issues are uncovered and addressed. A QC system should not only track loan defects, it should also provide a standardized, documented process for how the lender uncovers and addresses those defects along with the effectiveness of the lender's remediation efforts. Regulatory audits can be onerous. Preparation need not be so laborious, with the right pieces in place.
Phil McCall is chief operating officer of ACES Risk Management Corp.
