QMS CEO Notes Top Three Compliance Problems in Loan Applications

In a company release, Tommy Duncan, CEO of ""Quality Mortgage Services"":http://www.qualitymortgageservices.com/index.html (QMS) and Certified Mortgage Technologist, exposed and explained the top three compliance issues concerning problematic mortgage origination applications.

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According to Duncan, ""[t] he number one compliance problem in the origination and retail side takes place during the initial 1003 Application.""

""We continue to notice incomplete borrower information, liabilities not lining up properly against the credit report, no HMDA [Home Mortgage Disclosure Act] data, and missing signatures,"" Duncan states. He went on, ""Although there was some improvement from 2011's 22.29 percent to 2012's 18.19 percent, mortgage loan officers should exercise more thoroughness in the completion and accuracy of this document.""

The second highest compliance problem, he said, is in initial disclosures of the Truth in Lending and Good Faith Estimate. QMS recorded a 16.25 percent error rate in 2012--though that was an improvement from 19.53 percent in 2011.

The third largest compliance problem, according to Duncan, regards missing or improperly prepared by the Federal Housing Administration.

""This is worsening as more and more originations are moving to the purchase market and first time homebuyers,"" he said. ""As the refinance market reduces and the purchase market returns, more government lending programs will be used, and likewise, as the initial 1003 and Truth in Lending defects improved from 2011 to 2012, disclosures required by FHA got worse in the same period.""

These defects increased from 10.87% in 2011 to 12.82% in 2012, and although regulatory compliance improved from the origination and retail side for mortgage banking, the amount of errors still grossly outnumber the mistakes made in the credit risk and valuation end of mortgage banking.

Duncan predicts that, ""Once mortgage lenders push aggressive pre-funding compliance programs down to the mortgage loan originators, the compliance numbers will continue to be high.""