Blog: The Value and Power of Prefunding Quality Control Reviews

By Kristin Broadley, QC Ally’s Chief Innovation Officer

In the first and second blog posts in this series, I focused on the technical aspects of Fannie Mae’s prefunding requirements that are going live September 1, 2023. More specifically, what we need to do and how we can accomplish compliance with the new guidelines by optimizing sampling, review types, and resources.

These reviews serve as a critical proactive quality control tactic. By conducting thorough prefunding quality control reviews, lenders can identify and rectify potential issues early on, ensuring loan quality, mitigating credit risk, and creating certainty regarding the overarching health of a lender’s manufacturing process. This builds trust and confidence with the investors, insurers and contributes to the stability of the greater mortgage market.

In this blog post, we’ll move away from the “what and how” and focus on the value that prefunding reviews provide to the lender, Fannie Mae, and the overall mortgage market.

The Power of Prefund:

  1. Revenue Driver: The often-overlooked benefit of manufacturing certainty is the ability to drive revenue within an organization. When a lender has line of sight into the quality of their manufacturing process, more informed and timely risk decisions can be made. This translates to an opportunity to drive revenue by expanding products and the credit box safely and with certainty.  Lenders can know that the loans being delivered are of high-quality and compliant with underwriting and regulatory guidelines.      
  2. Enhanced Loan Quality: The primary benefit of prefunding quality control reviews is the improvement of loan quality prior to closing. By conducting quality assessments during origination, lenders can identify and rectify potential issues before the loan closes. This results in the delivery of higher-quality loans, reducing the likelihood of defaults and improving overall investor and insurer confidence.
  3. Reduced Credit Risk: Through prefunding quality control reviews, lenders can identify and address potential credit risks associated with loans. By ensuring compliance with underwriting standards and regulatory guidelines, lenders can minimize the chances of default, foreclosure, and other credit-related issues.
  4. Greater Efficiency: Prefunding quality control reviews help streamline the loan origination process by catching errors, inaccuracies, or missing information early on. By identifying and remediating issues before loans are submitted for delivery, lenders can avoid delays, rejections, and the need for additional documentation post-closing. This leads to more efficient operations, speed to closing, and an overall smoother and expedited experience for borrowers.

Prefunding quality control reviews are an essential component of the mortgage process. They provide numerous benefits to lenders, borrowers, investors, and insurers. By embracing prefunding quality control reviews as a valuable tool in the loan origination process, lenders can ensure certainty regarding the health of their manufacturing process.