Building 3 Lines of Defense for Maintaining Quality in Mortgage Servicing

Expert Perspectives: Hugo Quintana is an Implementation specialist at ACES Quality Management and former ACES client

Published July 12, 2022


Hugo Quintana is an Implementation specialist at ACES Quality Management and former ACES client.

Why should servicing be a priority for Financial Institutions?

HQ: Origination outlooks for 2022 have increasingly declined given the changes in rates and recent macroeconomic factors resulting in volatility in the market. Fannie Mae’s projected single-family mortgage origination volume has dropped from $3 trillion to $2.8 trillion. For comparison, total origination volume in 2021 reached $4.5 trillion. Fannie also expects a 7.4% decline in home sales for 2022, followed by a 9.7% reduction in 2023. As a result, margins are expected to be lean throughout 2022 as origination activity dwindles and per-loan profitability declines.

Thus, Financial Institutions may need to rely more heavily on their servicing revenue to carry them through the current down cycle. To confidently rely on that revenue, however, Financial Institutions must be able to assess the integrity of their servicing portfolios and ensure servicing staff strictly and consistently adhere to all relevant servicing rules, guidelines and regulations.

How can Financial Institutions maintain the quality of their servicing assets?

HQ: More often than not, a Financial Institutions compliance department is heavily dependent on human resources hours and spreadsheets. While this method may enable lenders to get by, it’s unsustainable and inefficient. Consider breaking servicing into three separate lines of defense – quality assurance, quality control and internal audit:

    How can Financial Institutions leverage ACES for all three lines of defense?

    HQ: Using ACES, Financial Institutions can support all three lines of defense while controlling costs, improving audit throughput and accuracy, producing reports in record time, communicating efficiently and sharing trending results with internal departments and regulators. Lenders utilizing ACES have seen double-digit increases in both productivity and loan quality. In fact, QC departments are often able to shrink in size because of the reduced need for highly-manual reviews. Click here to view our customer success stories.

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