QC-MAC Prefunding Audits

Pre-Funding Quality Control Review

Q	Why should a Mortgage Company be concerned about ensuring that Pre-Funding Quality Control is conducted on its loans prior to funding?
A	The benefits of having a good Pre-Funding quality control review process are as follows:

Increases PROFITABILITY
Decreases the RISK of Repurchases
Produces Higher QUALITY Loans
Develops GOOD Investor/Lender Relations
Reduces COST i.e. Guarantee fees, and loan cost

HIGH LEVEL OF CONFIDENCE REPORT

QC-MAC’s Pre-Funding Quality Control Review is designed to provide the Lender with a “High Level of Confidence” that the information provided in the file for underwriting purposes DOES or DOES NOT contain accurate information. However, due to the fast turn-a-round time requirements of pre-funding reviews, it is virtually impossible to be 100% accurate in pre-funding reviews. Therefore, the Lender is given a “High Level of Confidence” report that the information reported is accurate but not guaranteed. When a negative Pre-Funding review report is issued, it is recommended that the loan be placed on hold until the Lender can review the file to make a final determination as to whether the loan should or should not be funded.

PRE-FUNDING REVIEW FILE SELECTION

Pre-Funding Quality Control loan file review selection processes is usually set by the Lender’s senior management and its underwriting team based upon its risk tolerance. Historically loan files are pulled for pre-funding reviews under two different categories:

1.	Random
	Management will decide what percentage (10-100%) of the total loans that are underwritten and approved will be subject to Pre-funding review. The loans will be randomly selected and placed into the daily pre-funding review group.
2.	Targeted
	These loans are selected for Pre-Funding review by management and underwriting, based upon the different situations that occur during normal business operations. It may be necessary to add additional targeted loans to the random sample based upon the following:
	a. b. c. d. e. f. g. h. i. j. k.	Loan to value FICO Scores Origination Sources Property Locations Loan Purposes Loan Types Social Security Numbers Borrower’s Employment The Employer Borrower’s Assets Other discretionary or targeted samplings including but not limited to the Underwriter’s “gut” feelings about the loan

DOCUMENTATION REQUIRED

1. Authorization to Re-verify Information
2. Final Application (1003)
3. In-file Credit Report
4. Pages 1 & 2 of the Appraisal
5. Schedule A & B of the Pre-lim
6. Loan Approval

THE PRE-FUNDING REVIEW PROCESS

1.	Lender ships required documents to QC-MAC via: a. Facsimile b. Email c. Courier
2.	Lender’s information received, date and time stamped and logged into the QC-MAC computer system for tracking and reporting purposes.
3.	QC-MAC validation process is of the following: a. The existence of the employer b. The employment of the borrower c. Compare the liabilities on the final application against the in-file credit report d. Validate title vesting e. Validate possible flipping (12 months title changes) f. Validate Value g. Validate undisclosed property ownership h. Validate undisclosed assets i. Validate Social Security Numbers being used j. Validate more that one Social Security Numbers k. Validate Credit Report l. Validate Fraud, Debarment and Exclusionary Lists m. Review documentation for Red Flags
4.	QC-MAC prepares a report for the Pre-Funding “High Level of Confidence Quality Control Report from its due diligent review process.
5.	QC-MAC faxes the Pre-Funding “High Level of Confidence Quality Control Report to the Lender.
6.	The Lender reviews the Pre-Funding “High Level of Confidence” Quality Control Report and makes the decision to Fund the loan or not to fund the loan until it has been provided sufficient documentation and/or information that will provide it with a HIGH LEVEL OF CONFIDENCE that the loan file is free of fraud, false statements, misrepresentations, significant discrepancies and/or program abuses.

MONTH END SUMMARY REPORT

QC-MAC will prepare a month end summary report indicating the number of Pre-Funding reports conducted each month along with the numbers and percentages of the relevant data that was captured during the Pre-Funding loan file review month.

TIME IS OF THE ESSENCE

Due to the nature and the urgency of getting loans closed as fast as possible in order to deliver fast and professional service for all concerned, the Pre-Funding (High Level of Confidence) Quality Control Report will be turned around by QC-MAC within 48 hours of receipt of the required documentation.

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