Market Analysis: Are Your Processes Sound?

*Are Your Processes Sound?*
**By Tony Garritano**

***As we all know there is a big push toward being as risk averse as possible. Investors are cracking down and nobody wants a buyback. So, if you’re a lender, what do you do? Dominic Iannitti, president and CEO of DocMagic, a provider of loan document preparation and delivery solutions for the mortgage industry, called on all originators to integrate automated loan file audits in their workflow throughout the mortgage production chain, from the time borrowers submit an application to the time loan file documents are prepared for delivery to the secondary market. Here’s why:

****“The traditional approach has been to perform an audit at the conclusion of the loan, before closing, but that’s not good enough anymore,” Iannitti said. “Only by monitoring compliance at every stage of the loan production process – from the time a borrower submits an application, to the time documents are prepared and packaged for investors, to every stage in between – can we be assured that the loans we originate are going to meet investor guidelines and compliance requirements so that down the road, lenders won’t be plagued by repurchase demands.”

****Compliance remains a serious issue as evidence of problematic loan files in the mortgage industry continues to persist. For example, Fannie Mae, the largest purchaser of residential mortgages in U.S., reported in February 2012 that it made a total of $23.8 billion in repurchase requests from lenders during 2011. That was an increase from $13.1 billion in repurchase requests in 2010. In fact, some lenders continue to owe billions to Fannie Mae for troubled loans.

****“With many of the loan parameters being set at inception, data integrity is essential to the entire origination cycle. Not only does a lender need to be aware of data that has changed, but equally important is data that has been lost along the way,” Iannitti continued.

****Technology exists today to make it possible for lenders to be more risk averse as Iannitti suggests. So, my question is: Why aren’t more lenders using it?