To err is human…well, mistakes in business, especially when you are in a lending business, can be disastrous. Worse is, if you continue making the same mistakes over and make no attempt to rectify it. Loan origination is one such business where repeated mistakes can not only result in losses but also wipe you off your business. Therefore, lenders need to maintain strict discipline and stringent quality control to reduce the chances of mistakes and rectify them at the soonest.
Incomplete Documents
Incomplete documents are a tricky issue for the lenders. Disbursing a loan without adequate documents is risky, as the loan from got bad in the future. However, rejecting a borrower’s application due to lack of documents will mean losing your customer to competition. Lenders often ignore the risk and approve loan without proper document to avoid losing the business, but end up making a loss. A better recourse would be to speed up your quality checks and ask the borrower for the missing documents before sanctioning the loan.
Sources of Loan Repayment
Before approving a borrower’s loan application, it is crucial to assess the borrower’s repayment capability. For this, it is important to check the primary and secondary income sources of the borrower. The inability of the borrower to service the debt will result in huge losses for the lender. However, many a time, the underwriter fails to evaluate borrower data that indicate the borrower’s inability to repay the loan and interest within the scheduled timeline. To arrive at the borrower’s repayment ability, the underwriter needs to evaluate the borrower’s total assets, liquid as well as fixed.
Gauge Credit Risk
Credit risk evaluation mandates an eye to the detail, apart from the obvious parameters such as borrower’s income, assets, and liabilities, credit score, etc. For example, the borrower may be working in an industry that is currently facing a meltdown or is working in a redundant technology, or the borrower has a history of losing the job every few months. The underwriter must use the latest tools, technology, and experience to arrive at the credit risk before sanctioning the loan.
Assessing The True Value of The Collateral
Underwriters ask borrowers for collateral as a protective cover in the event the borrower fails to repay the loan. The collateral could be one or more assets, property, or land. But before the loan is approved, it is important to assess the true value of the collateral. If the collateral value is less than the loan, the lender may suffer a loss, if the borrower doesn’t repay the loan. To avoid such losses, the underwriter must carry an in-depth review of the collateral to arrive at its true value.
Not Able To Unearth Potential Frauds
With the mortgage rates at an all-time low, there has been a surge in loan applications. Often lenders are hard-pressed for time to complete the backlog and therefore, may ignore red flags such as for example- inconsistencies in vital data, not calling for a key document, and more. Inability to detect fraudulent borrowers results in losses for the lenders.
GrowQ: The Key to Avoid QC Mistakes By Lenders
GrowQ has an experienced team of quality control experts to handle timely loan reviews. We evaluate every aspect of the loan, from documentation verification and validation, credit risk, collateral, compliance and more. With our professional QC services, we offer an unparalleled advantage to the lenders by identifying and flagging inaccuracies, incompetency and potential fraud early on, to prevent costly mistakes. We take care of mortgage compliance requirements and align the structure of the loan selections as required by your agency and various statutory authorities.
With our exhaustive experience in the mortgage industry, we are your ‘go to’ outsourcing partner for all your mortgage needs, ranging from origination, QC audit, title services, and more.
We strategically partner with lenders and underwriters to meet the operational challenges of the mortgage industry and offer a seamless customer experience.
Reach out to us and we would be happy to answer any queries you may have!