Effective fraud prevention and quality control audits demand clear and concise mortgage audit checklists. The checklists must cover all aspects of the underwriting guidelines and provide the auditor reminders of what to look for. Audit checklists created in a universal format provide the highest level of consistency and usability.
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Mortgage audit checklists always start with the guidelines. Auditing the file to the guidelines requires knowledge of what guidelines are being used. If the file used is Desktop Underwriter or Loan Prospector, include a section for those guidelines to be detailed. Putting this section first reminds the auditor of what to look for. Include relevant sections such as income required, assets required, appraisal type required, etc.
The mortgage audit checklist typically begins with the credit report. When auditing credit reports, you should verify that all credit trade lines have been included in the debt-to-income ratios. Compare the report to the application. Verify that the information matches, the credit report provides address data, employment history data and AKA information (does the file have a junior or senior with mixed credit?). Provide space for pertinent notes regarding Social Security numbers and addresses to compare to other documents in the file.
Income sections of mortgage audit checklists tend to be larger than the other sections. Many different types of income require access to as many different types of reminders. For wage earning borrowers, provide sections for income calculations and comparisons using standard formats ($__*40=$___*52=_/12=____). Self-employed borrowers require a more complex system. Using the standard Fannie Mae Form 1084 calculate income directly from the tax returns. Non-employment and retirement income provide yet another section to include. Provide an area to compare the data collected with the actual income used for the file.
The asset section of the mortgage audit checklist ensures the funds used to close and satisfy reserve requirements meet the guidelines of the program. This information, when cross-checked against the rest of the file, provides insight to other potentially negative issues. The existence of many large non-payroll deposits could indicate self employment. Cross-checking the income documents for tax returns is critical. Also, ensuring the assets used to close actually belong to the borrower is vital, check whose name is actually on the asset statement. Complete mortgage audit checklists must include all of these items.
The property section of the mortgage audit checklist must include sections for the appraisal, title work, and insurances. The appraisal provides the lender with its security; ensure the checklist provides areas for third party verifications of the home's existence, as well as the comparable sales used on the appraisal. A section for calculations confirming the size of the home based on the appraiser's sketch is recommended as well. Always provide space for the appraiser's license to be verified. Comparing the title work and insurance documentation with the appraisal allows the auditor to ensure all of the data support each other.
The sales contract section of the mortgage audit checklist allows the auditor to ensure the contract meets the lending guidelines. The checklist should always include a complete contract, and final purchase price comparison. Also include items such as seller's name compared to the appraisal section of "current owner on title," seller contributions of closing costs compared to program guidelines and rent-back clauses compared to program guidelines. Mortgage audit checklists should include reminders to look for personal property in the sales contract as well, since these create a negative effect on the purchase price of the home.
Complete mortgage audit checklists also include sections for the closing documentation. Include reminders for checking the HUD-1, note, deed of trust, and all closing conditions with the closing instructions. Ensure your checklist includes a box asking if all documents have been signed by all parties and that they match the signatures on the application. Checklists should include reminders for when files close with power of attorney, and in the name of a trust, specifically that it was approved by the underwriter.