Interthinx announced today that it has identified two major defects in the outsourced Quality Control programs of lenders that affected residential mortgage loan files in 2011 and may pose significant risk in 2012.
According to Interthinx, 40.9 percent of its Quality Control findings relate to missing documentation or data integrity issues. Eligibility and credit issues account for only 18.3 percent of 2011 findings. “Many in our industry will be surprised to learn that more than 40 percent of our findings last year were related to missing documentation or data integrity issues,” said Connie Wilson, executive vice president.
“It’s significant when comparing this recent data to data from 2006 to 2009 when missing documentation only accounted for 7.1 percent of all findings,” said Wilson. “If lenders are not outsourcing their quality control processes, they should at least consider having someone from the outside take a look at their processes. If a lender’s internal quality control process mimics their internal originations process, the lender could easily miss documentation or data integrity issues.”
“The shift towards manufacturing defects in 2011 from historical borrower eligibility issues is a significant finding,” said Jeremy Burcham, director of quality control for Interthinx. “Today’s borrowers are very well qualified for the most part. However, a well qualified borrower does not always protect lenders from elevated defect rates or even repurchase issues. The lender’s loan manufacturing process needs to be sound in all areas to avoid potential repurchase. A simple breakdown can leave the lender on the hook for a loan that should have been bulletproof.”The Quality Control process provided by Interthinx includes learning how each client does business to assist in identifying critical issues from application to close. Interthinx provides lenders valuable statistics on the individuals who deal with their loans on a daily basis to identify training and process needs and to help lenders gain more confidence about the loans they originate. “If lenders haven’t used outsourced quality control in the past, 2012 may be the year to try it,” added Wilson. “To reduce repurchase requests, most major Government Sponsored Enterprises (GSEs) recommend having an independent source back up internal processes.” About Interthinx Interthinx, a Verisk Analytics (Nasdaq:VRSK) subsidiary, is a leading national provider of comprehensive risk mitigation solutions focusing on mortgage fraud, collateral risk and valuation, regulatory compliance, forensic loan audit services, loss mitigation, and loss forecasting. With more than 20 years of experience in customizable risk evaluation technology, Interthinx offers proven and effective predictive analytics to the residential mortgage industry through its experience with millions of loan applications and fraud incident data from thousands of monthly loan reviews. Throughout the mortgage life cycle, the Interthinx suite of services can increase the value of client portfolios with its comprehensive and holistic approach to loan quality and compliance. Winner of multiple awards for technology, Interthinx helps clients reduce risk, increase operational efficiencies, satisfy regulator demands, manage data verification, remain compliant, and mitigate loan buybacks. The Interthinx quarterly Mortgage Fraud Risk Report is a standard for the financial services industry. For more information, visit www.interthinx.com or call 1-800-333-4510.