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What happens when documentation is missing from a Quality Control loan file?  Nearly 30% of all lenders will receive a Notice of Incompleteness, Notice of Reject, Repurchase Request or a high defect rate.  Missing documentation can lead to misguided interpretations by an auditor, causes delays, and results in extra workforce resources, which all leads to the bottom line – corporate earnings.

For more years that they would care to count, missing documentation has been in the top ten of every agency’s list of common defects associated with quality control reviews.   Why does this happen and what can be done about it?

One of the most frequent reasons for missing documentation is due to lack of training of the staff sending the files.  Lenders often rely on checklists that show which documents are to be included in the loan file for quality control audits.  Checklists are a great tool, but they often cannot provide the amount of detail that may be unique to each loan.  Letters of explanation, underwriter justification statements, additional comparables, and more than 1 month of bank statements are examples of some documents that may not be on your checklist.  This is where training needs to come in.  Training your staff to recognize what additional documentation to look for will greatly reduce the need to send those additional documentations separately or improve the initial results of your quality control reports.

The second most common reason for missing documentation is technology.  In addition to missing documents, faulty technology may also result in distorted documents, partially copied documents or the infamous upside down documents.  Lenders should be checking their software or imaging systems regularly to be certain that any technology mishaps are repaired promptly.

Some of these suggestions may help to improve the quality of your loan packages so that you may benefit from sending a COMPLETE loan package:

  • Assess your missing documentation status – review quality control reports and agency notices – does a pattern exist? Determine what needs to be fixed.
  • Analyze why the documents are missing – is it technology based or is your staff not trained to identify what additional documentation may be needed for a thorough audit?
  • Make someone responsible for decreasing the number of missing documents – set a target date for improvement.
  • Write new procedures for the staff. Use examples from actual loans with missing documents to help train the staff on looking outside what is shown on the checklist.  Determine if and when a second look is required before the loan package is delivered.
  • Examine your results regularly and make adjustments as needed.

“Efficiency is doing better what is already being done. Effectiveness is deciding what to do better.” –by Peter F. Drucker