Quality control needs to be performed on loans from origination until the loan is paid-off and needs to be applied to 100% of loans to truly manage risk, says Joe Helfrich, EVP and chief legal and risk officer.
The new mortgage market requires a change in mindset. Data show loan quality continues to improve.
For years, some lenders would only perform quality control on 10% of loans after they closed, he adds, but today lenders realize that simply is not good enough.
Another lender challenge in Helfrichs view will be the strict loan quality control lenders are likely to attract from the private sector that is now contemplating a return into the secondary market.
Regulations that define quality mortgage requirements are one example of how lenders are expected to minimize loan defects, says Mike Vitali, SVP and chief compliance officer who recently joined LoanLogics.
In 2014, there will be less room for error that leads to loan buybacks, he says, which can only happen when lenders have the advanced systems and analytics in place, as well as the compliance expertise necessary, to produce quality mortgage loans.
The new unit is led by Vitali, Helfrich and Gerry Glavey, who is the SVP and chief credit officer. All three are experienced mortgage industry veterans.
Cost-efficient, loan risk management is critical in a marketplace where profit margins are thin, says Glavey. He added that the marketplace also demands a combination of great technology and compliance leadership.
Lenders often receive advice only from attorneys who can interpret the law but do not have practical mortgage lending experience and may have never worked in a government entity, argues Vitali. The new marketplace also requires a mix of legal, regulatory and practical lending experience that turns a compliance burden to true business benefit, Vitali added.