TENA’s Analysis of Servicing Audit Findings
To identify frequently occurring mortgage Quality Control audit exceptions, TENA analyzed the findings from tens of thousands of QC audits it completed during the first quarter of 2016. Below is a list of the most frequent and trending exceptions.
- Required participants Not on SAM & LDP list.
This question was added to our testing script in September, 2015 with the effective date of FHA’s Quality Control, Oversight and Compliance section of the Single Family Housing Policy Handbook 4000.1. Previously the requirement for the check was required for Borrower’s seeking an FHA HAMP as stated in Mortgagee Letter 2009-23. The guideline effective with 4000.1 expanded the requirement for the SAM and LDP checks to additional participants. The expansion of the requirement and the fact the requirement became effective prior to the Servicing and Loss Mitigation section of the handbook makes TENA believe that many servicers were unaware of the guideline and thus the frequency of this exception has trended upward. Servicers should also be aware that print-outs of the eligibility checks for each participant are required to be maintained.
Guideline Snip from FHA SFHPH 4000.1 – V.A.3.f:
A) Standard
The Mortgagee must verify that none of the participants in the servicing transaction reviewed were debarred, suspended, under an LDP for the FHA program and jurisdiction, or otherwise ineligible to participate in an FHA transaction. This includes participants in a loss mitigation transaction.
Participants in ta servicing transaction may include, but are not limited to:
– Borrowers applying for an FHA-HAMP Loss Mitigation Option
– Underwriters
– Real Estate Brokers
– Closing Agent
– Title Company
– Employees of the Mortgagee, or Affiliates participating in HUD programs for or on behalf of the Mortgagee, who have influence or control over the evaluation, approval, or outcome of the servicing loss mitigation, or claim transaction.
The Mortgagee must verify participant eligibility using the SAM Excluded Parties List and the LDP list, as applicable.
B) Required Documentation
The Mortgagee must maintain documentation that supports each participant’s eligibility.
Click here for full guideline on AllRegs®
- Call during an acceptable time of day.
The Fair Debt Collection Practices Act requires that a debt collector communicate with borrowers between 8AM and 9PM local time at the borrower’s location. TENA has identified numerous instances of calls being placed to a delinquent borrower at times that are outside of that range. When dealing with loan transactions that are in various time zones, it is importance to remember that call times are relative to the time at the borrower’s location and not necessarily at the caller’s location.
Click here to review the FDCPA 15 U.S.C. §1692c(a)(1)
- Short-year annual escrow account statement sent to the borrower(s) within 60 days after receiving the payoff funds.
The Real Estate Settlement Procedures Act (RESPA) states if a borrower pays off a federally related mortgage loan during the escrow account computation year, the servicer shall submit a short year statement to the borrower within 60 days after receiving the payoff funds. Over the first quarter of 2016 TENA has frequently found that this document was either provided outside of the 60 day time frame or it was not provided at all.
To review RESPA 12 C.F.R. § 1024.17(i)(4)(iii) to ensure you’re click here.
- Borrower being provided a written notice of the right to receive a copy of all appraisals or other written valuations.
The Equal Credit opportunity Act (ECOA) indicates a creditor shall provide an applicant a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. A creditor shall provide a copy of each such appraisal or other written valuation: a) promptly upon its completion; or b)three business days prior to consummation of either a closed-end credit transaction or the opening of an open-ended credit, whichever is earlier. TENA has noted an increase in Regulation B audit findings relative to loss mitigation reviews. The most common audit exceptions cited regarding this matter are that there is no evidence that the valuation was provided to the creditor or that the valuation was provided outside of the stipulated time frames.
To review ECOA 12 C.F.R. § 1002.14(a)(2) to ensure you’re compliant click here.
- A notice of written approval offering a loss mitigation options was not provided to the borrower within 30 days after receipt of loss mitigation application.
The Real Estate Settlement Procedures Act (RESPA) specifies that if the servicer receives a complete loss mitigation application more than 37 days before a foreclosure sale, then, within 30 days of receiving the complete loss mitigation application, a servicer shall: (a) Evaluate the borrower to determine all loss mitigation options available to the borrower; and (b) Provide the borrower with a notice in writing stating the servicer’s determination of which loss mitigation options, if any, it will offer to the borrower on behalf of the owner or assignee of the mortgage. The servicer shall include in this notice: a) the amount of time the borrower has to accept or reject an offer of a loss mitigation program; b) if applicable, the right to appeal the denial of any loan modification option; and c) the amount of time the borrower has to file such an appeal. TENA has frequently cited an audit exception regarding this requirement. The cause of the problem often traces to delays in underwriting of the file, especially in cases where initial applications are incomplete and completed information is subsequently provided by the borrower.
To review RESPA 12 C.F.R. § 1024.41(c)(1)(ii) click here.
- Income calculated correctly in evaluation of loss mitigation waterfall review.
TENA has noted an increase in audit exceptions that are due to calculation discrepancies that occurred during borrower’s loss mitigation reviews. These exceptions often occurred for two reasons: a) failure to include all of the borrower’s income as part of the financial package; or b) including non-borrower income in the calculation without using a credit report to properly evaluate the non-borrower’s debt picture.
