To identify frequently occurring mortgage servicing quality control audit findings, TENA analyzed over 29,000 findings identified in thousands of QC audits it completed during the third quarter of 2016. Over 1,700 unique citations were identified within those 29,000+ findings. Some of the emerging trends and common issues noted are outlined below.
1. Audit Finding: Property inspection report did not contain all required information.
All property inspections performed on a FHA loan, at a minimum, should include the following items, where applicable:
– Date of the inspection
– Identity of the individual inspector and the inspection company
– Is the property occupied?
– Is he house locked?
– Is the grass mowed and/or are shrubs trimmed?
– Is there any apparent damage?
– Is any exterior glass broken?
– Are there any apparent roof leaks?
– Does the house contain personal property and/or debris?
– Are any doors or windows boarded?
– Is the house winterized?
– Are there any repairs necessary to adequately preserve and protect the property?
During the period of July-September 2016, TENA noted an increased frequency of inspection reports maintained in the servicing systems of records with missing elements. In particular, the identity of the individual inspector performing the property inspection was missing from the reports. It is important to review company policy and procedures to review inspection received for complete and accurate information.
To review the FHA SFHPH 4000.1 – III.A.2.h(xi)(C) guide click here.
2. Audit Finding: Subsequent property inspection on vacant property not completed in timely manner.
In reviewing the analysis of findings, TENA noted an increasing number of findings relating to whether the property inspections being performed timely. The issue was particularly noticed on subsequent inspections once a property was determined to be vacant. Investors and Insurers vary slightly on their timeframes for subsequent property inspections; however, generally an inspection should be performed monthly. Reviewing processes and procedures with your property management vendor to ensure follow-up property inspections are being performed timely could help prevent missing timeframes for the required inspections. Click here to view a summary of property inspection frequency requirements by agency.
3. Audit Finding: Letters and/or electronic communication sent to the borrower between the 20th and 25th day of delinquency to inform the borrower of the delinquency and amount due for FHA insured loans.
On March 14, 2016 the Servicing and Loss Mitigation section of FHA’s 4000.1 Single Family Housing Policy Handbook went into effect. Within the Collection Letters and Electronic Communication section of the Early Default Intervention section it indicates, “The Mortgagee must begin mail or electronic communication collection attempts between the 20-25th day of delinquency. Since the effective date of the regulation TENA has seen a number of findings regarding letter or electronic campaigns beginning outside of the required days of delinquency or not being sent at all. It is also important to remember that the mortgagee must document in the servicing file all mail and electronic communication attempts to reach a borrower with a delinquent mortgage. A finding was also cited in the cases where servicers are unable to produce the letter or electronic communication sent to the borrower.
To review letter and call time frames review FHA SFHPH 4000.1 – III.A.2.h.(vi)(A)(1).
4. Audit Finding: Servicer failing to release required information to the borrower upon a loan being paid-in-full in the State of California.
In reviewing the third quarter analysis of findings, a California state requirement started to trend along with our Federal and Agency requirements. The requirement necessitates the servicer to return to the borrower any Note, Mortgage, security agreement, trust deed and/or assignment upon payment in full. California Financial Code § 22337 indicates that upon repayment of any loan in full, release all security for the loan, endorse and return any certificate of ownership and cancel or plainly mark “paid” and return to the borrower or person making final payment, any note, mortgage security agreement, trust deed, assignment or order signed by the borrower, or an optical image reproduction thereof; except those documents that are part of the court record in any action, or that have been delivered to a third person for the purpose of carrying out their terms, or a security agreement that secures any other indebtedness of a borrower to the licensee, or original documents otherwise required by law. In many cases TENA is unable to find documented evidence in the servicing file or system the servicer returned the documents to the borrower once they have paid their loan in full.
Review Cal. Fin. Code § 22337 requirement in detail.
5. Audit Finding: No evidence in the file that homeownership counseling information was provided to the borrower by the 45th day of delinquency.
According to the National Housing Act, a servicer must notify the home owner or mortgage applicant of the availability of homeownership counseling offered by the creditor or provided by a nonprofit organization approved by the Secretary and experienced in the provision of homeownership counseling, or provide the toll-free telephone number. The notification should be provided to the borrower before the 45th day of delinquency. TENA continually sees this finding trending with a majority of the findings found on non-FHA loan types. FHA clearly lays out the homeownership counseling requirement in its Single Family Handbook (4000.1 – III.A.2.h.(ix)(A)) which is the likely explanation for the lower rate of findings in that loan type.
Review the National Housing Act (12 U.S.C. § 1701x(c)(5)(A-C)) in detail.
