Freddie Mac requires a lender's
quality control program for mortgage loan origination
to include certain basic elements:
QC plan. The lender's quality control
program must be in writing.
The quality control program must provide standard
operating procedures for all employees who will
be involved with or affected by the quality control process.
The quality control program must operate independently
from the mortgage origination and underwriting departments.
QC operations. The QC program must be
capable of evaluating and monitoring the overall quality
production on a regular and timely basis. It must include
procedures to ensure that sample selection, mortgage
file reviews and reporting of findings to senior
management are conducted on a timely basis.
of the sampling. The program must select for
QC review at least 10 percent of one of the lender's
annual home mortgage production, secondary market
home mortgage production or Freddie Mac home
mortgage production. Any mortgages excluded from the
lender's quality control
sample selection process are not eligible for
sale to Freddie Mac.
sampling. Quality control personnel
must have the authority to conduct additional
reviews at their discretion.
scope sampling. A lender must warrant that
over the course of each 12-month period, the
samples are representative of the full scope of the lender's product line
and production process. The "full scope" of a lender's product
line and origination process includes mortgages from all product lines, states
of operation. each branch office, each
third-party involved in the origination
process and mortgages with high-risk characteristics including high
loan-to-value ratios, adiustable-rate mortgages, three- and four-unit
properties, manufactured homes, cash-out refinances, investment property
mortgages. mortgages requiring a cautious
review of the borrower's credit reputation and caution mortgages.
Prospector loans. Loan Prospector mortgages
must make up a representative portion of the lender's
quality control sample.
review. The lender must schedule its sampling
procedures so that every home mortgage within
the selected population has a chance of
being selected for review
within 90 days of the note date.
sampling. A Seller with a total annual production
volume in excess of 5,000 home mortgages may substitute
a statistically based sampling method for the
10 percent requirement.
of third-party QC reviews.
A lender may use third-party quality control services
for all or part of its
quality control program. The services must comply with
Freddie Mac's requirements and the lender must monitor
and evaluate the performance of third-party quality control
services on a regular basis
The lender must review third-party quality control
findings and take the same
corrective actions as it would with respect to quality
control findings made
by its own staff.
of transfers of servicing. A lender's
quality control program must include policies and procedures
addressing transfers of servicing.
When servicing is transferred, the lender must
retain copies of the file documents to complete the
reviews, or make arrangements with the new servicer
to assist in the reviews.
Records of completed QC reviews must be
provided to the new servicer.
The results of quality control reviews must be reported
in writing to the lender's senior management
within 90 days of selection of the mortgage
files for review.
action. The lender must
thoroughly analyze the findings affecting the
acceptability or eligibility of mortgages and
initiate any necessary
corrective actions. If a finding affects a mortgage's
eligibility to be sold to Freddie Mac, the lender
must notify Freddie Mac in writing within
The lender must maintain complete records for each mortgage
file selected for QC review and must document and
explain discrepancies or inconsistencies found in the mortgage
file that affect the eligibility of the mortgage based
requirements of the lender, the mortgage insurer
or Freddie Mac. The lender must retain all records of
documentation of any corrective action taken for at least three years from
the date of the QC review. These records
must be included
information provided to the new servicer if a transfer
of servicing occurs.