If you have closed on a new home or simply refinanced a mortgage recently, you most likely signed a loan document at closing that authorizes your lender (or the bank to whom your lender sells your mortgage) to verify your credit information after closing.
This can include reverification of your employment, income, bank accounts, credit references and even occupancy. This document is often entitled “Quality Control Release” or “Authorization to Re-Verify,” and it basically allows for the mortgage file to be randomly selected as part of a quality control review program. Not only does this reverification procedure allow for a lender to confirm the accuracy of the various information that was collected during the loan application process, but it also serves as an audit of the lender’s mortgage production and compliance with regulatory and agency requirements.
It is hardly surprising that post-closing quality control reviews have become the norm in the aftermath of the housing crisis, spurred by extremely lax lending guidelines. What some new home buyers may not realize is that, more often than not, the lender that originates the loan will sell the servicing rights to the loan to a different bank within 30 days of closing, such that this re-verification authorization extends to the new bank. This also means that the loan could be sold before the first payment becomes due.
The good news about the post-closing quality control reviews is that they typically do not involve a hard credit pull. Rather, the lender is simply reviewing the original report that was used during the underwriting process.
This legal update is published as a service to our clients and friends. It is intended to provide general information and does not constitute legal advice regarding any specific situation. Past success does not indicate likelihood of success in any future legal representation.
ABOUT THE AUTHOR
Katherine Lang Colhoun joined MGC Real Estate’s Charleston office in July of 2016. She earned a Juris Doctor from the University of South Carolina and Bachelor of Arts from the University of Virginia. Katherine is a member of the Charleston County Bar Association.