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The Two-Minute Drill Play #2 - "Caaaaallibrate Good Times, Come on!"

Kool and the Gang were celebrating not calibrating, but mortgage lenders can still find a reason to be positive about comparing loan level QC results with Fannie Mae (FM). Fannie recently began QC calibration exercises with all their top volume lenders, and will soon begin selectively targeting the remaining lender base. Make no mistake, FM did not embark on this labor-intensive effort because they were happy with the accuracy and alignment of lender quality control efforts. While it may seem that getting picked by Fannie for a QC calibration is hardly a reason to celebrate, seize this opportunity to bring fundamental discipline to your QC process. Lenders should be calibrating findings with GSEs and QC vendors every month and not wait for Fannie’s prodding. After all, if your reviews are not accurate, and not arriving at the right outcomes, what good are they? Because of the self-contained nature of the QC process, it’s a reasonable expectation to achieve near 100% certainty that your QC reviews find the right defects at the right severity level on every review. The accuracy of lender’s QC reviews will be the central focus of Fannie Mae’s calibration engagement. In their QC insider on calibration, Fannie poses three questions lenders must answer:

1. Do we regularly compare defects identified in our QC results with those cited by our investors to ensure alignment on how loans are evaluated?

2. What criteria are applied when determining the severity of a QC defect, and are they applied consistently throughout the organization?

3. Are we confident that our defect rate reporting is reflective of our overall loan quality and is reliable as a key performance indicator?

SWS Risk Advisory LLC helps lenders prepare for, and respond to Fannie Mae’s QC calibration exams by providing the expertise to drive permanent change in lender QC processes. Celebrate like Kool and the Gang by confidently relying on your QC results to drive improvement in loan quality and thus retaining those hard earned profits. Enjoy this vintage live performance video of their iconic song and get your feet moving today!

For current and past “plays” (editions) of “The Two-Minute Drill” click here. And to learn how our awesome sponsors can help you with your Risk Management and QC needs, go to:

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