From reactive to proactive: reshaping QC for today’s mortgage landscape

The mortgage industry has witnessed its fair share of tribulations and transformations, but its response to those challenges and changes is often a tale of reactiveness. While no one can truly predict the future, there are plenty of instances where a little bit of prevention could have gone a long way. Regulatory changes, digitalization and the lending cycle are a few classic instances where the industry is often caught in a reactionary state.

This is especially true in regard to quality control (QC). Lenders often rely on their post-closing QC process to identify and rectify loan quality and/or compliance issues. This reactive approach only addresses issues after they’ve occurred and often proves costly, time-consuming and ineffective in regard to getting to the root of QC defects, leading to a cycle of constant firefighting that hinders growth and damages stakeholder confidence.

The industry needs to shift its focus from crisis management to prevention with proactive QC. Not only does this approach set lenders up for success regardless of the origination environment, but it’s also a regulatory imperative now that Fannie Mae requires lenders to conduct pre-funding QC on a minimum of 10% of their production.

This shift is especially important when thinking about the mortgage lending cycle. While it’s no secret the industry is cyclical, many lenders fail to adequately prepare for this reality. As rates fall, refinances increase until something triggers a rise in interest rates. From there, lenders seek to cut costs as volumes and, eventually, profitability decline. The industry reorients itself to focus on purchase loans, HELOCs and new products, and as mortgage servicing rights (MSR) values increase, lenders raise cash by selling off a portion of those.

This is where the industry currently sits in the cycle, and the road ahead is where lenders face the most risk, as the industry starts to see the fallout from the earlier parts of the cycle and experience the full impact of the refi boom ending. Having a dynamic QC platform is an effective and critical hedge against falling back into the reactive cyclicality of the industry.

ACES Quality Management empowers mortgage lenders and servicers to take control of their operations and embrace proactive QC. ACES seamlessly combines cutting-edge technology with comprehensive data analysis, giving mortgage professionals the tools they need to identify, anticipate and rectify potential issues in near real time.

“I love the ACES CONNECT Communication portal. It’s so easy to send out our exceptions, get those responses back, and then track those conversations back and forth,” said Kelly Cooper Spencer, quality control manager and business intelligence data manager for Thrive Mortgage. “I’ve never used a portal for exception responses before, and I love it. I would never go back. It’s life changing.”

With this shift to proactive QC, lenders can identify potential issues before they escalate, optimizing processes and minimizing the likelihood of errors. This transition requires a fundamental shift in mindset, placing an emphasis on data-driven insights, predictive analytics and innovative technology solutions.

“By partnering with ACES, we have witnessed an overall improvement in the quality of our reviews. The platform has enabled us to focus on pre-funding reviews and allocate our resources to other areas where defects need correction. As a result, we have experienced a remarkable 50% increase in audit output for both pre-funding and post-close loan reviews,” said Hilda Melendez, quality control systems director at Lennar Mortgage. “Previously, we would handle only two to three loans per day, but now we consistently handle at least four, and sometimes five, post-close loans, including pre-funds.”

The mortgage industry stands at a crossroads where embracing proactive QC is not merely a choice but a necessity for sustained growth and success. ACES Quality Management is championing the transition from reactive to proactive QC, offering mortgage professionals a comprehensive toolkit to reshape their operations and build a more efficient, compliant and resilient future for their businesses.

“ACES affords me the ability to employ experts in their fields because I don’t have to employ additional people to get the volume done,” said Heather Morris, vice president of Quality Control and document custody manager of Zions Bancorporation. “Our QC servicing can handle 1,200 loans in 36 audits with just three auditors in a span of 18 days, with reporting completed within 60 days. We consistently achieve this level of performance month over month for both departments, a total of six auditors for both teams for the last several years thanks to ACES.”

As the industry evolves, the role of technology in shaping its trajectory cannot be overstated. The marriage of data analytics, predictive insights and dynamic platforms like ACES sets the stage for a mortgage industry that is not only responsive to challenges but anticipates and overcomes them. By embracing proactive QC, mortgage professionals are not just keeping pace with change; they are ensuring a brighter future for the industry and all its stakeholders.

“With all of the high demands from the industry, if you had an audit from Fannie or Freddie or even FHA, I simply can’t imagine how I would be able to present to them and show them we’re doing what we’re supposed to be doing without ACES,” added Julie Baril, quality control manager at Norcom Mortgage