VA requires quality control programs for origination to include certain basic elements:

 

Written QC plan. Every nonsupervised lender's quality control program must be in writing and must be submitted with the application for automatic authority.

 

Independent audits. The quality control plan must provide for a program of internal or external audit of the lender’s compliance with VA loan processing and underwriting requirements or independent review by management personnel knowledgeable of such requirements who have no direct loan processing or underwriting responsibilities.

 

Adequate scope. The QC plan must provide for reviews of not less than 10 percent of all VA-guaranteed mortgages the lender originates monthly, including its branches and authorized agents, except that lenders making more than 140 VA mortgages monthly may use statistical sampling methods. The sample must include loans processed by all loan officers. It must expand the scope when fraudulent activity or patterns of deficiencies are identified. For LAPP lenders, the reviews must include LAPP quality control
procedures. Review of each branch office that originates VA loans must have an annual on-site review.

 

Management notification. The plan must provide for at least quarterly written notification to the lender’s senior management of deficiencies cited as a result of audits or reviews.

 

Corrective action by management. The QC program must require prompt and effective corrective action by senior management on all deficiencies identified by either the lender or VA and maintenance of documentation of deficiencies and corrective actions taken. Employees must be held accountable for performance failures or errors and the program must provide that for patterns of deficiencies identified, management will provide corrective instructions to all relevant employees.

 

Deficiencies reported to VA. The plan must require prompt reporting of any violation of law or regulation, false statements or
program abuses by the lender, its employees or any other party to the transaction to the VA office of jurisdiction. It must provide for furnishing audit or review findings to VA on demand.

 

Keeping QC plan and VA policies kept current. The QC plan must ensure that the lender’s procedures are continually revised to reflect changes in VA requirements and that employees are informed of the changes. Each of the lender’s offices, including its approved agents and branches must maintains copies of all VA publications, including regulations, handbooks and releases relevant to the lender’s VA loan origination activities.

 

Timely review of loans. The QC plan must provide for the review all loans in the quality control review sample within 90 days of loan closing.

 

Reverifications. The plan must require written reverification of borrower’s employment, deposits, and all sources of funds and reordering of a new credit report from another credit source.

 

Authorized processing. The plan must assure that all loans submitted to VA for guaranty are processed only by employees of the lender or by its authorized agents and that no employee performing VA loan origination or underwriting is debarred or suspended.

 

Underwriting review. It must require the reviewer, on each loan, to determine whether underwriting conclusions and lender documentation are overall complete and accurate.