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QC Underwriting Review After Mortgage Approval Prior To Clear To Close

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QC Underwriting Review After Mortgage Approval Prior To Clear To Close

This BLOG On QC Underwriting Review After Mortgage Approval Prior To Clear To Close Was UPDATED On August 29th, 2018

QC Underwriting Review Explained

QC Underwriting Review is the final stage done by lenders prior to sending out the mortgage documents and sending the wire out to the title company.

  • Not all lenders have QC Underwriting Review process
  • Why have QC Underwriting Review when the mortgage underwriting has fully underwriting the borrowers and issued the clear to close
  • A QC Underwriting Review may just be a senior underwriting manager signing off on a mortgage underwriter file prior to a clear to close
  • Other lenders will literally reunderwrite the whole file by a separate underwriting department

Why Even Have QC Underwriting Review

I have worked at many mortgage companies and the majority of lenders do not have a QC Underwriting Review department. If they do, it is just a second underwriter overlooking the initial mortgage underwriters work to make sure that the initial underwriter did not miss anything. Other lenders do a complete mortgage underwrite which may take over a week.

We will be discussing the QC Underwriting Review Process by lenders that do have such a process during their mortgage process:

  • QC Underwriting Review is Quality Control Underwriting Review
  • The QC Underwriting Review process normally only takes 24 to 48 hours
  • A Quality Control mortgage underwriter will review the whole mortgage loan file that was underwritten by the original underwriter
  • QC Underwriting Review Underwriter’s role is to make sure there are no errors made
  • Their role is also to make sure that the mortgage loan will be sellable on the secondary market after the mortgage lender funds the loan
  • The QC Underwriting Review Department will contract with a third party search company like Lexis Nexus or Data Verify to do a nationwide search on the borrower
  • The third party search company will do an extensive public search to see if they can discover any public records that have not been disclosed by borrowers and/or that is not reporting on the credit report
  • QC Underwriting Review is either done just prior to issuing a clear to close or right after a clear to close has been issued, depending on the lender

When Is QC Underwriting Review Done?

QC Underwriting Review depends on the mortgage lender.

  • Some lenders will do QC Underwriting Review prior to issuing a clear to close
  • Other lenders will issue a clear to close and the QC Underwriting Review will be done prior to funding
  • A clear to close is when a mortgage underwriter has cleared all the conditions from the conditional mortgage loan approval
  • The underwriter gives the green light to fund the mortgage loan
  • If the QC Underwriting Review is done after the clear to close, then if Quality Control finds something wrong with the file with the third party search, the clear to close will be on hold until the issue or issues is cleared up
  • Some common issues that is caught during QC Underwriting Review is when public records such as judgments show up by third party searches where the judgments or other public records did not report on the borrower’s credit report

Loan Denial After Clear To Close

There are cases where there is a mortgage loan denial after a clear to close has been issued:

  • This is because Quality Control finds potential fraudulent issues with the mortgage loan application
  • With the company that I work for, Quality Control takes over after the mortgage underwriter issues a clear to close
  • Normally most of our clear to close files move on to closing and funding and we have no issues
  • However, there are some cases where QC may find issues that was either overlooked by the mortgage underwriter or items and factors that were not disclosed by the loan applicant and/or items that were not picked up on the credit report
  • Let’s look at a case scenario where a clear to close can get revoked

Discovery From Third Party National Public Records Search

Let’s say a mortgage loan borrower went through credit repair and the credit repair company removed and deleted a bunch of derogatory credit items such as collection accounts, charge off accounts, judgments, tax liens, student loans, bankruptcies, and multiple foreclosures.

  • The mortgage loan applicant marked all NO’s on the last page of the 1003 mortgage application
  • This is where the application asks for have you ever filed bankruptcy, have you had any foreclosures, do you have any outstanding judgments, and are you a party to any lawsuit
  • The mortgage loan applicant marked NO’s to the above questions
  • This is because all of the derogatory items were removed on all three credit bureaus by the borrower’s credit repair consultant he hired
  • The mortgage originator, the processor, and the mortgage underwriter did not think anything of it
  • This is because those items were not reporting on the credit bureaus
  • The underwriter saw that on the questionnaire the borrower marked all NO’s
  • The mortgage underwriter has based his decisions on the income, assets, liabilities, credit, credit scores, and credit history from the credit reports of the borrower
  • The underwriter then issues a clear to close

QC Underwriting Review Prior To Clear To Close

The file gets submitted to the Quality Control Underwriting Review Department for final review prior to closing and finding.

  • QC order third party national searches using third party vendors like Lexis Nexis and/or Data Verify where they do a national public records search
  • The third party vendor comes back that the borrower has multiple bankruptcies, multiple foreclosures, multiple judgments, and multiple tax liens
  • Public records that got deleted from the borrower’s credit report do not disappear from public records
  • Derogatory credit items such as collection accounts and charge offs can be deleted and third party companies cannot find out about it because they are not public records

However, public records such as bankruptcies, foreclosures, short sales, judgments, tax liens, child support, alimony, and other public records do not disappear and mortgage lenders will find out about it. It is best that you disclose all public records in the beginning of the mortgage process because the Quality Control Division of the mortgage company will definitely find out prior to closing and funding the mortgage loan.

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