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Document Custodian Audits and Ginnie Mae

May 23, 2019 BY MQMR Blogger

Document Custodians hold an important yet often overlooked place in mortgage finance. They perform
some of the most foundational functions supporting the industry, and yet, they are often an
afterthought. It would be impossible to secure financing to real estate without the legal protections
provided to the lender and the borrower by the deed of trust, the promissory note and the title policy.
Due to the importance of these documents, many investors, including Ginnie Mae, require that holders
of MBS pools audit their document custodians. The failure to maintain adequate controls over a
document custodian can negatively impact a lender's business operations.

Ginnie Mae is explicit in its requirements for each issuer to perform a review of their Document
Custodians. All of the requirements for auditing Document Custodians are detailed in HUD Handbook
2000.04 Rev-2 CHG-11, Section 6-5 (Handbook). Per the Handbook, the reviews must be regular and
onsite. If an issuer has more than one Document Custodian, Ginnie Mae requires that at least one
custodial institution must be reviewed each year, and all must have an onsite review within a three-year
cycle. The review must be comprehensive because the Document Custodian is essentially a vendor of
the pool issuer. The audit of a Document Custodian should include an onsite review and a loan level pool
review. The loan level review should start with a selection of the loan pools to be reviewed. Once the
selection has been made, the pools should be tested to ensure compliance with HUD-11711B and HUD-
11706, among other final pool certification requirements.
 
Ginnie Mae guidelines are clear that the administration of the mortgage pools is the responsibility of the
issuer. The risk of lost files and uncertified pools falls to the issuer of the pool. By completing regular
audits of your Document Custodian and ensuring ongoing and pro-active communication, you will be
compliant with regulations while confirming that your collateral files are being handled with proper
care.


Our mission is to help our clients climb higher by bridging the gap between risk and compliance. If
you are concerned that your Document Custodian audit practices aren’t what they should be, let us put
your mind at ease. Contact resources@mqmrnews.com to discuss how MQMR and our servicing focused
sister company, Subsequent QC, can help you identify your risk and recommend the appropriate
controls to leave your organization better protected.