QA Trends: MI Decision Tips to Improve Quality and Help Prevent Fraud

Whether you’re the fastest or the most thorough, we’re all human… and mistakes can be made. That said, we’ve noticed some trending errors that may have surfaced from the challenging market many of us in the industry are facing. Eligibility requirements are more difficult to meet, and a smaller market might be impacting motivation for misrepresentation.

So, while it’s important to remember that mistakes happen, staying current on GSE guideline changes, market conditions, and industry constraints is essential to prevent fraud and maintain a successful and quality loan origination. With this in mind, we have some quality assurance tips for you to reference when you are underwriting your loan. And we have many resources available for you to add to your toolkit. Knowledge is power, after all!

Today, we explore some QA defects that our experts have found trending. Be sure to keep an eye out for income calculation errors and misrepresentations in your submissions. It’s time to dive in!

Top Trending QA Defects

As the housing environment continues to experience volatility in rates and prices, lenders are stretching to make loans work as every dollar of income matters. As the types of qualifying income become more complicated to assess, it’s creating more situations to misrepresent income and occupancy. How does it also influence the types of QA findings we may likely see?

Let’s explore the top QA defects that have stood out, as well as the observations and suggestions you can take to help prevent them:

• Income and Occupancy Misrepresentation
  • Be aware of common red flags and question, as necessary. Ensure team members are familiar with these red flags (check out GSE guidelines and resources on fraud for more information).
  • Have borrower(s) sign an attestation at closing regarding occupancy and income.
  • Implement a policy to reverify the borrower’s employment as close to closing as possible.
  • Question recent large increases in salaries compared to prior earnings, new employment with significant increase shortly before application date, and recent conversion from self-employed to wage earner. Scrutinize the income documents and ask questions.
• Incorrect Income Calculation (not self-employed)
  • Conduct income analysis training for underwriters to identify how to calculate fluctuating income and ensure YTD income supports qualifying income.

Want to get more insight into how you implement better practices for your origination submissions? Check out our quarterly MI Decision Tips flier to discover the most frequently made Agency and Enact MI decision errors and ways to avoid them.

Might These Errors Lead to Fraud?

More than anything, the real estate and mortgage industries are facing unprecedented obstacles and expectations with closing loans. If proper precautions and QA aren’t in place, mortgage fraud may continue to rise…

Occupancy and income misrepresentation are not only aiding in an uptick of fraud, but the lenders and underwriters charged with submitting quality loan originations are having to slow production as more documentation is being needed to address red flags. More lenders are becoming concerned with misrep and are looking for tools to help them fight fraud especially as more scams and schemes seem to be popping up every year. But who and what can you trust?

Pay attention to red flags, do your research, and trust your mortgage partners and GSE resources to ensure better compliance. Fannie Mae and Freddie Mac have some great trainings and tools you can check out to learn more about fraud prevention best practices. And if you want to learn more about fraud tips, Mary Kay Scully of Enact discusses ways you can empower yourself and your borrowers with the right resources to help prevent fraud. She is also hosting an upcoming fraud webinar – click here for more information!

Errors are to be expected with the underwriting process. However, vigilance both in how you underwrite and help fight fraud make all the difference for a successful loan closing. Be sure to arm yourself with the right tips and tools to avoid rescissions and repurchases!

Want to learn more?

Be sure to make the most of your MI experience. Please explore our many underwriting resources for more information. Because going the extra mile comes easy for us, we also offer a comprehensive suite of training resources to help boost your industry experience.

Fraud is preventable with the right tools and information at your fingertips! For more insight on how to help fight mortgage fraud, refer to guides and training materials from Freddie Mac and Fannie Mae.

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