The banking industry is strictly regulated by both government and private entities, and staying in compliance with all of their regulations can be a stress-inducing and mind-numbing experience. However, having an effective quality control program in place for your bank or financial institution can be the foundation you need to simplify the process and more easily comply with important regulations regarding data security, loan processing, document retention, and more.
We’ve done some research on the matter, and have created this quick guide to help you establish some best practices for an effective quality control program in your bank or financial institution. These best practices are based on extensive research conducted by Freddie Mac, and are intended to be a guideline to help you improve your business.
Step 1: Early Considerations
Here are some things you need to consider that may influence the structure of your quality control program:
- Your organization’s size and structure
- Your staff’s experience and areas of expertise
- Your physical location
- The variety and volume of services you provide
- Origination sources of any loans you handle
- Existing policies and procedures for your branch
All of these factors can have a direct impact on how you will create your quality control program. For example, the experience of your staff may influence which employees are responsible for certain steps in the quality control process, while various origination sources for your loans may require different processes in order to handle the quality control reviews properly.
Once you’ve established what aspects of your organization will impact the quality control process, you’re ready to move onto the next step.1
Step 2: Proper Documentation
The review documentation should be provided to your branch’s management, the origination source of the loan (if applicable), and to any applicable mortgage sellers or regulatory bodies as requested. This means that your documentation needs to always be organized and up to date so that it can be provided upon request and easily understood by those who receive it.
There are many different processes that your institution may be involved in, and they all should have a quality control review process in place:
- Reverifications, including verbal reverifications
- Loan reviews
- Transfers of servicing
- Mortgage applications
- Title searches
- Sales contracts
- And so on
When documenting your quality control review and its results and findings, you must ensure that you maintain complete and accurate records for every file reviewed. You must also keep thorough documentation showing any discrepancies or inconsistencies found during the review, an explanation for those discrepancies, and how they were handled. This will show your organization’s due diligence in meeting regulations and requirements.1
It is also important to note that all of this documentation should be kept for a minimum of three years from the date of review. For this reason, storing your documentation electronically and setting up automatic retention policies for your quality control reviews is the best option.2
Step 3: The Quality Control Representative
Ensure that this person is capable of carrying out the following duties:
- Staying up to date on regulatory requirements of all government entities and investors, and sharing any new information or changes to these requirements with the appropriate staff members.
- Overseeing quality control reviewers and ensuring they have the skills and experience needed to perform the reviews.
- Modifying the review program if changes are needed.
- Working to find solutions to any problems discovered during quality control reviews.
- Reporting all quality control review findings to senior management and following up on findings.
Depending on the size of your staff, your quality control representative may have more or fewer responsibilities than those listed above. Just ensure that none of their other responsibilities will interfere or conflict with their duties in the quality control program.
You may also choose to use a third party for quality control services. If you choose this route, you are still responsible for ensuring that the work they perform is in compliance with any applicable regulations, so we strongly encourage you to monitor and evaluate their performance regularly.1
Step 4: Safe Delivery of Customer Information
For the protection of your customers and your organization, it is vital that you ensure all documents containing clients’ personal information is handled correctly.
For any physical delivery of quality control documents, ensure that these guidelines are followed:
- Always double check and confirm the accuracy of the destination address or fax number that the information is being sent to.
- Verify the contents of the shipment, and keep a detailed inventory of what is being sent; this will help you to know what, if anything, is missing when the packet is returned.
- Do not mark the envelope or package as “confidential” as this draws attention to the package and may encourage unauthorized personnel to open it.
- Do not send the information to a residential address if it can be avoided. This is especially important if the package will be delivered to the doorstep, as there may not be someone present to receive it. Sending such information to a P.O. Box or business address is much more secure.
- Always track the package so that you can confirm when it is sent and received.1
However, even with such precautions in place, physically sending sensitive information is not the best option for any financial institution. This is why entities such as Freddie Mac often only accept files electronically for quality control reviews. This provides yet another reason for all banks and financial institutions to store their documents in electronic format, whatever those documents may be. This is simply a more secure process and also makes the quality control review process much easier.2
Quality control reviews are a vital part of business for all organizations handling customer finances and loans. Having a review process in place and following the best practices outlined above can help to protect your organization from both simple errors and major security problems, as well as ensuring that proper guidelines for lending and other financial services are always followed.
For more information on how proper document management software can simplify quality control reviews for your institution, contact eFileCabinet and see how other banks and credit unions have benefited from this software.
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