Examining QC Trends in the Mortgage Servicing Space

MetaSource, LLC, a mortgage compliance services partner, has published its annual servicing quality control (QC) findings report which reveals that while the market was contracting amid plummeting volumes and shrinking workforces in 2022, servicing documentation challenges were not. During its servicing QC audit findings analysis, MetaSource reported several document-related issues that have plagued servicers for years, but the team also uncovered a fresh layer of documentation challenges.

Missing bankruptcy notices and proof of claims documentation topped MetaSource’s findings list. The team’s analysis showed that servicers struggled with court-related documentation in 2022, as a wave of mortgage delinquencies and borrowers seeking bankruptcy court protection created new demands.

At the same time, many servicers brought outsourced work back in-house or sold off parts of their portfolios throughout the year. Several were left with a disproportionate number of trouble-prone files as a result.

MetaSource Director of Mortgage Operations Hilarie Cline noted that poor processes for importing and indexing data and documents left servicers at a disadvantage that further complicated servicing transfers in an already complicated year.

“Some transfers happened four or five months earlier and they’re still going through the indexing process today,” Cline said. “It can create a real challenge if an agency–like Fannie, Freddie, Ginnie, or HUD–or an investor wants to audit.”

According to MetaSource’s findings, the top servicing QC findings from 2022 include:

• Missing bankruptcy notices and proof of claim documentation
• Failure to apply payments within 24 hours of receipt
• Incorrect setup of hazard insurance premiums and due dates
• Inefficient monitoring and delays in filing for relief from bankruptcy stays on Chapter 7 and 13 filings
• Absence of current hazard insurance policies in the system of record during the audit period
• Unaddressed discrepancies between hazard insurance coverage details in the servicing system and the actual insurance binder on file
• Failure to correctly record payment receipt dates in the servicing system
• Failure to properly report accurate loan status to credit bureaus
• Delayed lien release submissions
• Failure to issue short year statements in a timely manner following receipt of payoff funds

Click here for more on MetaSource’s 2022 Servicing QC Findings Report.