U.S. Department of Veterans Affairs Veterans Benefits Administration

U.S. Department of Veterans Affairs Veterans Benefits Administration Loan Guaranty Service Monitoring Unit Dreama Walker, Chief Monitoring Unit April 23, 2019 1

Monitoring Unit (MU) History OIG Completed Lender Audits MU Established in 1989 – 30 years Audit Transition Based on Reviews of Files only Very nitpicky (every error was in the report) Dropped Minor Trend Items Reports only included Major Items and Egregious Loans. Operational Audits (Quality Control Plans) 2

Selection Criteria RLC LP management recommendations JD Power list for Loan Originators Loan Admin recommendations Default rate - number of months from Guaranty to Default (RPO23 report) Lender increase and decreases in Revenue - LGY reports Lender volume report (top 300 Lenders) - LGY reports Servicer volume and delinquency report - Loan Admin JD Power list for Mortgage Servicers LoanSTAR personnel recommendations (Information came from LP reviews and business news events) 3

Operational Audit Pre-Audit Work by Auditors Quality Control (QC) SARS/Underwriters Declined Loans and Non-compliant files Marketing Materials Workload/Training/Branch Offices/etc. 4

Most Common Findings for FY18 & 19 Quality Control (QC) Violations – 70 Egregious Loans – 14 (unapproved underwriter) LAPP Quality Control Violations – 17 No Finding Reports - 17 5

Quality Control Violations ABC was not meeting the requirements found in the VA Lender’s Handbook, Chapter 1, Topic 14i, Elements of a QC Plan – Funding Fees Paid. ABC was not meeting the requirements found in the VA Lender’s Handbook, Chapter 1, Topic 14f, Elements of a QC Plan – Deficiencies Reported to VA. ABC was not meeting the requirements found in the VA Lender’s Handbook, Chapter 1, Topic 14l, Elements of a QC Plan – Review of Loans. 6

LAPP Quality Control ABC was not meeting the requirements found in the VA Lender’s Handbook, Chapter 15, Topic 15.02 - Lender QC System Requirements and Topic 15.07 - LAPP Processing Procedures. ABC was not meeting the requirements found in the VA Lender’s Handbook, Chapter 12 Minimum Property Requirements. 7

Where to Find Help The VA Lender’s Handbook: – Chapter 1, Topic 15 – Elements of a QC Plan – Chapter 15 – Lender Appraisal Processing Program 8

Current “Hot” Topics Unapproved Underwriters SARs are NOT automatically Underwriters Employee Transfers (must get new approval) Explain Income less than 2 years Make Sure Credit is Reestablished 9

Questions 10

Thanks Thank you for helping us provide this important benefit to our Nation’s Veterans!!! 11