With rising rates, the market is witnessing a shift from originations to HELOC products. As the market evolves, lenders should always be aware of loan quality. HousingWire recently spoke with Brian Adams, President of Due Diligence at Consolidated Analyticson due diligence in today’s mortgage market.

HousingWire: How is the market evolving in terms of loan offers?

Brian Adams: With the sharp increase in mortgage rates, we have essentially seen a sudden stop in refinancing activity. And while new loan originations are still available, we see more and more HELOCs and 2nds as the main change. Additionally, we expect the troubled trade to come back stronger than it has been in recent years.

HW: How does the pricing environment affect due diligence?

BA: Rising rates lead to increased volume of HELOCs and 2nds. As a result, it no longer makes sense for most borrowers to get a refi. Yet often they have a significant amount of equity they can leverage through these loan products, and making significant changes to their current homes is more affordable than “trading” in this environment. rate. We are also seeing credit unions grow as lenders try to gain market share in a challenging environment. One of the more interesting trends is that some of our historically smaller clients are starting to grow rapidly over the last 90-120 days, with some of the larger lenders pulling out or pulling out of the market.

HW: What does due diligence look like for different types of loans?

BA: That’s a loaded question! Across the spectrum, lenders must adhere to various procedures and audits to ensure that specific loans meet purchase requirements. In addition, a comprehensive review of documents and data ensures accuracy and completeness while providing an opportunity to flag any inconsistencies, and quality control reviews help reduce risk.

Most of our due diligence is carried out on a securitization perimeter. However, each type of loan has its specific scope, and our clients often have overlays on top of loan-specific requirements. Therefore, we spend a lot of time ensuring that our client reach and overlays are preserved in our due diligence system. Keeping the customer scope consistently hard-coded maintains the integrity of the underwriter’s loan review.

HW: How does Consolidated Analytics help lenders maintain loan quality?

BA: Whether a client is buying or selling assets, they must confirm that the underlying collateral is of optimum quality. With increased federal rules and increased regulatory scrutiny, mortgage transactions must adhere to standard industry practices. Due diligence reviews and analysis of all aspects of the origination process provide the big picture to confirm that standards are being met in all transactions. This ensures credit, compliance and rating quality and minimizes overall portfolio risk for the lender.

Our main goal is to be an independent third party review firm. We review guide/scope loans and report our findings accordingly. Sometimes our clients don’t like our conclusions, but they respect the fact that we act with integrity. Whether our client is the originator or the investor, we always review the loan within the parameters provided and report accordingly.

We have a comprehensive quality department that not only tracks quality and provides any training needed on an individual level, but is also proactive in providing training for types of loans we haven’t seen recently. The goal is to keep the entire team of underwriters and quality control analysts on the lookout for all types of loans, currently in the market or expected to be in the near future. Consolidated Analytics invests in our people and we believe we have a top notch team.

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