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#1504389 - 02/03/11 02:40 PM Auditing mortgage division
Southern gal Offline
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Joined: Mar 2008
Posts: 504
TN
We have a mortgage company that is a divison of the bank rather than a subsidiary. The loans that are originated are sold and not booked to the bank. We recently added the mortgage dept as a line item to our audit schedule with a risk rating of medium requiring it to be audited 2x a year, mostly because this service is new to our bank. Do any auditors out there have this type of setup that could give me some guidance as to where to begin an audit. Discussions have already included areas of BSA, HR, Privacy, any others?

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Audit
#1504400 - 02/03/11 02:46 PM Re: Auditing mortgage division Southern gal
edAudit Offline
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edAudit
Joined: Jul 2008
Posts: 4,781
You are here
We do not have a simular arrangement. But if you originate mortgages

RESPA
HMDA (LARs Getting it right)
Flood

Sold to Fannie/Freddie I would review the selling guides.
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Opinions can be considered as coming from anywhere but my employer.

CAMS


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#1504419 - 02/03/11 03:12 PM Re: Auditing mortgage division edAudit
Southern gal Offline
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Joined: Mar 2008
Posts: 504
TN
Thanks EdAudit,

I'll add those also.

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#1504426 - 02/03/11 03:19 PM Re: Auditing mortgage division Southern gal
rlcarey Offline
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Joined: Jul 2001
Posts: 79,893
Galveston, TX
Add Reg. Z (including advertising, MLO compensation, etc), UDAP, FCRA, MLO registration, etc. They should be subject to a full blown lending compliance audit. I also think that with all the changes in the lending regulations and probably the put-back provisions that exist in your contacts with the loan purchasers that your risk rating is probably too low...... IMHO this is not a medium risk operation.
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#1504443 - 02/03/11 03:26 PM Re: Auditing mortgage division rlcarey
edAudit Offline
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edAudit
Joined: Jul 2008
Posts: 4,781
You are here
IMHO this is not a medium risk operation

I would tend to agree with but this an understatement as it is a hot topic with regulators and down the road with issues with fannie/freddie can be a hot topic for a long time.
_________________________
Opinions can be considered as coming from anywhere but my employer.

CAMS


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#1504647 - 02/03/11 06:12 PM Re: Auditing mortgage division edAudit
Southern gal Offline
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Joined: Mar 2008
Posts: 504
TN
Thanks to you both for the input...I agree totally and will be passing this info on to our compliance committee.

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#1505403 - 02/04/11 05:25 PM Re: Auditing mortgage division Southern gal
Reads Regs Offline
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Joined: Nov 2004
Posts: 2,294
You might also want to do a fair lending review.
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#1505555 - 02/04/11 07:39 PM Re: Auditing mortgage division Reads Regs
DerrickAuditor Offline
Member
Joined: Mar 2008
Posts: 91
USA
Compliance is just the beginning.

Financial - ensure loans held-for-sale or "warehoused" at month-end or quarter-end are recorded at the lower of cost or market. Ensure gains on sales are recorded correctly. Usually lots of gl accounts for fees and various reconciliations to review in mortgage banking.

Lots of operational issues - does management have good monitoring reports to ensure loans will close within the rate lock period so loans are not uncommitted? Are they reviewing and taking corrective action from the QC reviews?

Review contracts with the 3rd party investors buying the loans. Look at how long and under what conditions before put-back provisions expire. Review loans that were put-back - determine why and what management is doing to prevent future put-backs. Assume loans are sold via best efforts contracts? Are loans sold one-to-one or in pools? Ensure loans are meeting the investors' guidelines.

Are you servicing the loans you sell? Lots to audit there if loans sold are "servicing retained."

We are examined by the FDIC, but this OCC exam manual (although dated), is still useful. http://www.occ.gov/static/publications/handbook/mortgage.pdf

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#1505930 - 02/07/11 03:08 PM Re: Auditing mortgage division DerrickAuditor
Southern gal Offline
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Joined: Mar 2008
Posts: 504
TN
Lots of useful info, thanks DerrickAuditor

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