Compliance diligence proves the old adage that “an ounce of prevention is worth a pound of cure,” especially when it’s the federal government minding the scales. That was the summary message delivered by Ben Slayton, president, The Lender Approval Department, speaking about implementing an effective quality control plan during a Reverse Mortgage Compliance conference in New York last week, sponsored by the American Conference Institute. This was the first reverse mortgage event held by ACI in more than two years but sponsors told RMD it is likely they will do another one sooner; probably in the fall of 2011.
In his thorough presentation, Slayton advised listeners that a changing auditor-to-lender ratio does not favor a casual attitude toward keeping accurate records and being in compliance with HUD/FHA requirements. Here’s how the scorecard looks: Last year, there were approximately 6,000 correspondent lenders originating reverse and forward mortgages and approximately 150 HUD auditors. Next year, there will be approximately 2,500 lenders and some 175 auditors. Do the math, Slayton notes. “It means every 12 to 18 months, you’ll be audited.”
He reckons that with a shrinking pool of correspondent lenders producing reverse mortgages and an advancing number of government auditors coming into the field, it is only a matter of time – and not much at that – before a lender can expect a knock on the door. Actually, according to Slayton, for every one “desk” (or remote) audit, there are nine “on-site” reviews, which he says should be more preferable to lenders because “then, HUD is in and out [of your office] in a week and they only see a certain number of files and spend a finite period of time reviewing your files.”
And, what’s the number one problem discovered in an audit? “The lender’s Quality Control Plan is not in compliance with HUD Handbook 4060.1 REV-2, Chapter 7. “And, if they have one, the mortgagee is not following the requirements of its own plan,” he notes.
Turning to another area of concern, Slayton says when it comes to a Quality Control Report Response, lenders should have a policy on how they will review those reports. “Do they have such a policy?” he asks. And, have they notified employees about any corrective actions taken? “HUD will be all over you” if you don’t,” he warned.
Written by Neil Morse