In my experience, if my procedures say that notes will be made, my examiners and auditors will look for notes when they are testing transactions. If your procedures state a Red Flag is cleared when it is documented by a black checkmark next to "Red Flag cleared" at the bottom of a Loan Worksheet, then they will be looking for that box to be checked when a Red Flag is identified.
While that may satisfy an examiner or auditor procedure wise, I think the greater risk would be if you had a consumer complain that the Bank should have caught the Red Flag and didn't, and that check mark is all the documentation you have to support it was in fact cleared. I have learned that unless my lenders document today, they are not going remember tomorrow.
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Keep calm, and let the compliance officer handle it....