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Proactive oversight of loan servicer relationships and regular audits of the servicer’s operations are not only in the best interest of a lender (master servicer), they are mandatory. The CFPB and the GSEs require that lenders be responsible not only for the work they outsource to their loan subservicer, but for complying with the regulations governing the lender/servicer operations as well.

Maintaining policies and procedures for selecting and assessing a subservicer is not only a best practice recommendation, it is also a FNMA requirement. Ongoing oversight procedures should include evaluating overall experience, training programs, financial strength, quality control, along with predictive trend and capacity reviews.

Periodic audits and quality control reviews to assess escrow management, delinquency management and regulatory compliance are just a few examples of the practices required to maintain FNMA master servicer status. Operational audits should include, at a minimum, customer service reviews, escrow administration oversight, collections and loss mitigation procedural assessment as well as bankruptcy, foreclosure, and REO management examination. As a master servicer, a lender should maintain and test their own policies and procedures of their subservicer as well as testing the subservicer's adherence to its own internal policies and procedures. Ongoing evaluation may be performed by the lender/servicer or the services of a qualified third party may be utilized.

Our mission is to help our clients climb higher by bridging the gap between risk and compliance. If you are concerned that your Subservicer 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.  For real life case studies on why servicing oversight is important, check out the SQC Difference.