Fhapartners's Blog

At the annual National Reverse Mortgage Lenders Association (NRMLA) meeting in October, 2010, David Keeney, managing director, of Clayton, Shelton, Conn, spoke about the current availability of a Warehouse Lines of Credit. The following is a exert of his speech:

‘Posing an impediment to all lenders, according to David Keeney, managing director, Clayton, Shelton, Conn., is the skittishness felt by warehouse lenders. “It’s amazing to me the concerns and fear on the part of the credit department related to the counter-party on issues like headline risk,” Keeney remarks. “There is still a huge fear on the part of these lenders. They want robust QC compliance processes,” he explains, “not just a lot of small talk, they want to see it. A lot of the better capitalized companies have state-of-the-art loan processing systems. If you don’t have that automated environment – all the necessary fraud checks, compliance checks – it’s going to be extremely difficult to pass that part of the review.”

Keeney continues: “They want to see well-written workflow processes; policies and procedures.” That does not mean “just going into the HUD manual and Xeroxing the QC plan; that doesn’t work anymore,” according to Keeney. “They want to see adequate loan loss reserves and a culture of doing what’s best for the borrower…not ‘what’s my fee’? [They’re asking:] What’s the business plan? That’s the new world order,” declares Keeney’.

This is why as a lender you need to create a Quality Control Policy and Program that is consistent with your business model and reflects how you currently do your business. In addition, I strongly recommend a professional outside company is contracted to perform your Quality Control funded and declined loan file reviews, unless, your company has the ability to create an independent Quality Control department.

The year of 2011 will be the year for FHA and Investors to make sure that all lenders are performing the necessary compliance reviews to ensure loan quality. The best way for any company to prove that they are taking the necessary steps to ensure quality is to have a robust Quality Control Policy and Program.