The Super Bowl may be decided by someone making a rookie mistake. Just ask the Bengals about a late hit out of bounds to put the Chiefs in field goal range. I work with many “rookie” lenders seeking GSE (Government Sponsored Enterprises) approval that often make a beginner’s mistake with their pre-funding QC sample size. Even many experienced, GSE approved small and medium sized lenders set their required pre-funding QC (PFQC) sample at a 10% random selection. Lenders mistakenly think the GSE's require a 10% PFQC random sample similar to the required post-closing 10% random. What a costly error when the GSEs only require a risk-based pre-funding sample. Currently, there is no minimum PFQC sample size. At last month’s Independent Mortgage Banker’s conference, Fannie Mae(FM) signaled they may start requiring a minimum amount of pre-funding QC. But it is highly unlikely they will require a random selection. Instead, Fannie Mae has long stated PFQC’s objective is to examine areas with a higher likelihood of significant defects and prevent them from closing. This allows lenders to strategically optimize their PFQC dollars. At $300 -$400 all in cost per QC file review, lenders immediately improve the bottom line by significantly reducing their PFQC sample size, while increasing the precision and effectiveness of their pre-funding QC reviews. The fact that Fannie is considering a minimum amount for PFQC work is another sign of their concern over the credibility of lender QC methodologies. SWS Risk Advisory LLC helps lenders design enhanced PFQC sampling models. Don’t fail a FM Mortgage Operational Risk Assessment (MORA) by not implementing your PFQC correctly.
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