Cogent Software Archives - Cogent QC: Award-Winning Loan Quality Control & Compliance Software

Cogent Selected for HW Tech100 List of Most Innovative Technology Companies

March 3, 2015 By Kaan Etem

Cogent is pleased to announce that we have been selected by Housing Wire for its 2015 HW Tech100 list of the most innovative technology companies in the housing economy. Over 250 nominations were received by the judges, who whittled the list down to the select 100. Of that 100, 60 were returning winners from last year and 40, including Cogent, were new inductees. We are honored to be included in such impressive company. As always, we will seek to continuously improve our technology in collaboration with our clients.

Here is how Housing Wire describes the HW Tech100:

New Mortgage Servicing Rules Take Effect

January 13, 2014 By Kaan Etem

The new mortgage servicing rules that the CFPB finalized in January 2013 became effective January 10, 2014, affecting the Truth in Lending Act (TILA) under Regulation Z and the Real Estate Settlement Procedures Act (RESPA) under Regulation X.

The amendments are intended to provide borrowers with detailed information regarding their loans, ensure that mortgage servicers do not unexpectedly assess borrowers with charges and fees, and ensure that borrowers are informed of alternatives to avoid foreclosure. The final rules should also provide borrowers with more timely and accurate responses to their complaints by requiring servicers to follow certain error resolution procedures.

As a servicing QC and compliance professional, you have already been preparing for the additional information and data tracking requirements, as well as the process changes. With luck, your auditors are trained and ready. And your software has been updated and tested to reflect the changes.

If you’re a Cogent client, this means you have updated your audit questions and implemented the appropriate question trigger rules. Maybe you’ve introduced additional findings options and workflow updates and configuration tweaks. Alternatively, you may be puzzling through how to put the pieces together most efficiently. If so, let us know at info@cogentqc.com. We are here to help.

Do You Know Your Defect Rates?

November 1, 2013 By James Robinson

Fannie Mae announced new quality control guidelines on July 30, 2013 that include a requirement for lenders to track defect rates:

https://www.fanniemae.com/content/announcement/sel1305.pdf
https://www.fanniemae.com/content/tool/qc-defect-rate-tutorial.pdf

Do you know your defect rates? If not, you will have to implement a process to track them in order to sell to Fannie Mae after January 1, 2014.

Surprisingly, Fannie’s new guidelines say that lenders should report both a “gross” defect rate and a “net” defect rate, (meaning “net” of defective loans that can be fixed.) Really? Loans that can be fixed after closing still cost the lender substantially more than loans done right the first time. And what about all the similarly defective loans in the population that weren’t sampled? Consider that an error that can be fixed 30-60 days after close may not be so fixable if the loan goes delinquent 10 months after close and is now a repurchase candidate. This means you can’t reliably extrapolate from a “net” sample defect rate to “net” population defect rate (interval).

Fannie’s new guidelines also say that lenders should track defect rates by severity, such as “moderate defects” vs. “significant defects”. This confuses ‘defects’, which are loan-level ratings, with ‘errors’, which are audit question-level ratings. This is more than just semantics. The final rating on a loan review should be a binary one: acceptable or defective. This is a requirement if statistical sampling is to be used.

Cogent has long asserted that the focus in QC reporting should be on the gross defect rate; this is the rate used to calculate sample sizes in our applications. Ultimately, the objective of quality control is not to fix defective loans in your samples, but to understand where the defects are coming from and fix the process.

Cogent clients are able to track gross defect rates with the standard functionality built into both the ProductionQC and ServicingQC applications. In Cogent’s applications, at the conclusion of each loan review, the QC auditor must assign an overall QC Decision. The descriptions of the available QC Decisions are controlled by the System Administrator, but each will result in a Final Decision of either Acceptable or Defective, as shown in the screen shot.

Assigning this Final Decision enables users to generate the Cogent Management Reports, which show gross defect rate trends and comparisons, and also to calculate and select properly-sized statistical samples based on the recent 3-period average defect rate for each sample type.

Secondary Review Options in Cogent QC Systems

October 14, 2013 By Kaan Etem

In the most recent issue of American Banker, the CEO of Cape Cod Savings had this to say about the burden of regulatory compliance:

“…Because of HMDA and RESPA, we have checkers who check the checkers. Then we actually have another third layer of checkers who check the checkers who check the checkers. Then we have two outside consulting firms that check again.”

Sound familiar? All too familiar for some Cogent clients, who have multiple layers of QC and compliance operations – often at the corporate level, at the business unit level, and on an outsourced basis. And they invest so much in quality control and compliance because the alternative is painful. To cite just one instance, the Mortgage Bankers Association (MBA) sent this around last week:

“CFPB Assesses Civil Money Penalties For HDMA Data Errors
The CFPB has announced that it assessed civil money penalties against Mortgage Master, Inc., a non-bank, and Washington Federal, a bank, after examinations identified significant data errors in mortgage loans reported pursuant to the Home Mortgage Disclosure Act (HMDA). CFPB followed the announcement with a bulletin outlining the elements of an effective HMDA compliance management system and the resubmission thresholds, as well as other factors that the Bureau uses to determine if they will pursue a public HMDA enforcement action and associated civil penalties.”

Among other things, that bulletin states that “effective HMDA compliance management systems frequently include … comprehensive and regular internal, pre-submission HMDA audits.”

Aside from under-scoring the sheer scope of today’s regulatory compliance requirements, this reality also highlights the need for efficiency in performing secondary and tertiary audit reviews. This is why Cogent has been introducing more extensive secondary audit review options. The latest Supervisor Override functionality was covered in our recent ‘Version 4 Overview’ webinar (clients may contact support@cogentqc.com for a link to the recording.) With that, the possibilities now include:

Revert a completed loan audit and make changes to the original loan audit.
Use Supervisor Review to conduct a parallel supervisor audit, while preserving the original auditor’s work as the official audit of record.
Use Supervisor Override to override individual findings, thereby modifying the official audit of record but preserving a record of the original auditor’s findings.

These different approaches can be combined with appropriate pending and completion of loan reviews to tailor different secondary reviews to different situations. When all eyes are on you, it’s always good to have options.

Categorize Audit Questions for Streamlined Reporting of Regulatory Data

September 30, 2013 By Kaan Etem

Sometimes it makes sense to organize audit questions by regulation. Compliance audits are often organized this way, with names of regulations comprising audit category names and audit questions clustering within those categories. This organization can be reinforced by audit category codes such as TIL, ECOA, CLA, FCRA and so on (hence, question number ‘TIL-012a’). This approach makes it quick and easy to report on regulation-specific audits using Cogent.

But frequently, audit questions are organized by category of defect, such as Assets, Credit, Liabilities, and Income. Traditional post-closing audits continue to be organized this way, as confirmed by FNMA recently (see recent blog post) In such a case, how do you report on specific regulations when a regulator comes in for an audit? The answer is via Categories.

Cogent’s loan audit software allows any audit question to be tagged with one or more Categories. Standard Categories include ‘area tested’, ‘regulation’, and ‘federal/state’. Additional Categories may also be created. With Category tagging, it is a simple matter to include in a report only those audit questions that are relevant to a regulatory audit. Access Category tables via your system’s Audit Lookup Table Manager under Administrator Tools.