Freddie Mac requires a lender's quality control program for mortgage loan origination to include certain basic elements:

 

Written QC plan. The lender's quality control program must be in writing.

 

Policies and procedures. The quality control program must provide standard operating procedures for all employees who will be involved with or affected by the quality control process.

 

Independence. The quality control program must operate independently from the mortgage origination and underwriting departments.

 

Timely QC operations. The QC program must be capable of evaluating and monitoring the overall quality of mortgage 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.

 

Scope of the sampling. The program must select for QC review at least 10 percent of one of the lender's total 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.

 

Discretionary sampling. Quality control personnel must have the authority to conduct additional reviews at their discretion.

 

Full scope sampling. A lender must warrant that over the course of each 12-month period, the selected 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.

 

Loan Prospector loans. Loan Prospector mortgages must make up a representative portion of the lender's quality control sample.

 

Timely 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.

 

Statistical 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.

 

Use 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.

 

Review 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 QC 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.

 

Reporting requirements. 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.

 

Corrective 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 30 days.

 

Recordkeeping. 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 on the requirements of the lender, the mortgage insurer or Freddie Mac. The lender must retain all records of QC findings along with
documentation of any corrective action taken for at least three years from the date of the QC review. These records must be included in the information provided to the new servicer if a transfer of servicing occurs.