Expert Perspectives: ARMCO’s EVP of Operations, Sharon Reichhardt
What are some perennial quality control issues that mortgage servicers are continuously trying to address?
SR: Servicers are always going to have to deal with the fallout from loans that were not originated properly or were originated using poor underwriting standards. We saw this with a lot of the FHA Streamline Refinance and some other, similar products – invariably, you're going to see increases in delinquencies, more issues regarding straw buyers, etc. That’s always going to be there.
Furthermore, lapses in control on the origination side inevitably make their way down to servicing, forcing lenders to eat or repurchase loans because of one failure that was not taken care of upstream. Of course, it's one thing if the loans are servicing-released, as there's not much you can do about those, but if you are servicing or have a sub-servicer, then you need to make sure you're up to date on all of the findings that are on the lending side and truly doing what I consider risk-based testing (because testing 10% of your loans just randomly is not going to give you everything that you need) to ensure that any risk or lack of controls are being shored up.
For me, it's really all risk-based. You need to make sure you identify those pockets of risk, and if that comes from the origination side, then so be it. You're constantly going to be re-evaluating where those risks are, but then you need to have the data and the audit steps in place to make sure that you're covering those things. It is a constant recalibration on the servicing side.