Abstract:
An automated system and method for evaluating and auditing lenders and loan portfolios is described. This lender evaluation system is user friendly and increases auditors&#39; productivity by, among other things, gathering all necessary information in a readily accessible electronic location. The lender evaluation system, and associated methods, further reduce the risk of potential human error and the risk of lost data, and concomitantly improves data integrity.

Description:
FIELD OF THE INVENTION  
       [0001]     The present invention relates to a system and method for evaluating and auditing lenders and loan portfolios. The invention is particularly useful for guarantors or insurers of mortgage loans, or portions of such loans, that are issued by independent lenders.  
       BACKGROUND OF THE INVENTION  
       [0002]     In the typical mortgage loan process, an applicant will approach a lender or lenders to arrange financing for the purchase of property/to obtain an equity loan. Lenders, in response, typically require an applicant to complete a loan application, which includes information on the applicant&#39;s ability to make payments as well as the applicant&#39;s credit background and prior financial history. As part of the loan process, the lender also will inquire as to the applicant&#39;s investment in the property. For a variety of reasons, applicants who invest less than 20 percent in a particular piece of property pose more of a default risk to lenders than those with a greater interest in the property. As a result, many lenders require “mortgage insurance” for loans having a loan-to-value ratio of greater than 80 percent. In the event of a default, the insurer guarantees payment of the loan amount to the lender, thus lessening the risk of an adverse outcome to the lender if the mortgagor defaults.  
         [0003]     Companies that provide insurance for lenders and loan portfolios are known as “mortgage insurers” or guarantors. Either by preexisting arrangement with the lender, or upon a specific request by the lender, the mortgage insurers underwrite a particular loan in exchange for a fee to be paid by the applicant or lender.  
         [0004]     Each mortgage insurer sets its own quality assurance measurements and guidelines as to which loans it will or will not insure. Those applications that do not meet or exceed a mortgage insurer&#39;s requirements will be denied coverage. Lenders may send mortgage applications to more than one mortgage insurer. One company may approve an application, while another may not. Mortgage insurers also must comply with all applicable local, state and federal laws.  
         [0005]     In certain instances, a mortgage insurer will “delegate” part or all of the underwriting process to a lender. In this trusted relationship, mortgage insurers provide coverage under the assumption that a lender has followed the established underwriting guidelines. Loans made by a lender, and insured by the mortgage insurer, are thus not underwritten by the guarantor at the time of receipt. However, because lenders and/or loan officers may not always adhere to the guidelines established by the mortgage insurers, it is necessary to audit the lenders and loan portfolios to verify compliance. Lenders that consistently fail to abide by the guidelines set by a mortgage insurer may be disallowed from future delegated business or may be subject to more strict scrutiny than those that consistently perform as required.  
         [0006]     Prior art approaches to evaluating lenders and loan portfolios were manual and time-consuming. In one prior art approach, auditors manually query a database containing data on lenders and loan applications to obtain a large set of potential audit candidates. In a further manual process, the auditor would select a random sample of such loans for audit, and for each loan in the sample, calculate several risk factors, including debt ratios (also known as debt-to-income (DI) ratio; these ratios are calculated by dividing monthly debts by monthly income) and loan-to-value ratios (a cumulative loan-to-value ratio, also known as “CLTV,” is calculated by dividing the first lien balance plus the second/equity loan by the estimated value of the equity provided). The auditor further would manually compare actual credit scores with reported credit scores.  
         [0007]     Because such calculations and comparisons were performed manually, the auditor potentially could miscalculate these factors. Moreover, the manual process could take several days to a week to complete because no system existed that presented the relevant data in an integrated manner. Using information that existed in different portions of a database, or different databases entirely, an auditor was required to create a manual log of relevant information to complete the audit.  
         [0008]     After completion of the foregoing preliminary steps, i.e., determining loans to be audited and creating appropriate logs, the auditor would thereafter engage in the actual audit, including the steps of corresponding with the lender to request information relating to the loans under audit and gathering all other necessary information to conduct the audit. Completing the audit involved further manual and time-consuming steps, such as generating paper worksheets and electronic summaries, e.g., in Microsoft Word or Excel, and then preparing a final response letter.  
         [0009]     Further complicating the audit process was the lack of simplified access to complete results of prior audits for comparison purposes. Although the final response letter and loan comments were maintained in an accessible location to auditors, the data and worksheets supporting the audit outcome were archived in microfilm in a separate location. In order to view prior results other than the loan comments sent back on a final response letter, an auditor would have to order microfilm and review it on a microfilm viewer. Due to the difficulty in accessing such information, auditors typically ordered prior audit files only when absolutely necessary and usually only if there were issues or questions from the lender.  
         [0010]     In view of the foregoing, there exists a need for a more automated and integrated manner of auditing lenders and loan portfolios and for creating and maintaining a database of audit results.  
       SUMMARY OF THE INVENTION  
       [0011]     The inventive system and method eliminates much of the manual and time consuming operations described above. An audit conducted with the inventive system and method can be accomplished in a much more efficient and accurate manner than previously known. The possibility of human errors, including errors in calculations, is significantly diminished.  
         [0012]     In a preferred embodiment, an integrated computer system, comprised of a customizable Microsoft Access application and a data warehouse, permits auditors to select sample loans for audit to insure compliance with quality assurance measurements and metrics. In a highly preferred embodiment, each lender is assigned a single master policy identification (ID), which ID may be used to track each loan. Data is “loaded” into the data warehouse electronically, e.g., through an interactive Internet application or through electronic data interchange, or manually.  
         [0013]     In practice, an auditor seeking to conduct an audit runs the customizable application which, in turn, automatically queries the data warehouse to obtain a selection of possible loans to be audited. In response to the query, the data warehouse returns a data set to the application, which presents the results to the auditor in a user-friendly manner. The auditor thereafter selects, on a random or otherwise predetermined basis, the loans that will be audited. Data is then copied from the data warehouse to the Access application for the selected loans to audit.  
         [0014]     In accordance with the invention, the system automatically creates loan worksheets for each loan as well as an online summary of the individual loan worksheets. Through the use of the customizable application and the mathematical operations of Microsoft Access, the invention eliminates the manual calculations used in the prior art solutions. Worksheets may further be automatically created for each loan as information is entered into the database.  
         [0015]     In a further aspect of the invention, audit request letters to lenders and other correspondence are automatically created. The invention uses preexisting letter templates in order to automatically populate contact names and address into letters to be printed. The auditor need only select the sample loans to audit, and the system thereafter automatically creates the needed worksheets, logs and correspondence with lenders.  
         [0016]     In yet another aspect of the invention, auditors on a field audit may run a separate function that creates a new file that may be exported to a remote application. This remote application eliminates the risk of lost data during travel. The data can be transported back to the main application during travel via email. It further permits management to review, on a daily basis, the progress of audits.  
         [0017]     Information generated during the course of an audit is tracked and stored in a centralized location. Auditors and other authorized personnel may thereafter easily access the complete file from prior audits, which eliminates the need to rely on microfilm. An online “journal” is further maintained for each lender, and auditors or company management may review each journal to review the progress of an in-progress audit, to document conversations with lenders, and to note risk factors for future audits.  
         [0018]     The inventive system and method further provides extensive reporting capabilities that did not exist, and in some instances, could not exist in the prior art. In one aspect of the preferred embodiment, the system flags “Low Volume” and “No Activity” reports that permits the mortgage insurer to readily separate and maintain lenders with little or no volume (“low volume” occurs where a lender has had insufficient delegated business to warrant an audit, whereas “no volume” indicates the lender has submitted no delegated volume for three consecutive months) from those that submit a larger amount of business. An advantage of this report is that lower volume lenders are not inadvertently overlooked by the mortgage insurer&#39;s audit team.  
         [0019]     The invention also assists auditors in conducting any needed follow-up in conjunction with the audit. It includes a follow-up tool that presents an auditor with a task list and other docket management information. 
     
    
     BRIEF DESCRIPTION OF THE DRAWINGS  
       [0020]      FIG. 1  is a block diagram illustrating an exemplary computer network.  
         [0021]      FIG. 2  is a block diagram illustrating an exemplary computer.  
         [0022]      FIGS. 3-14 , inclusive, are screenshots of an exemplary user interface that interactively queries and/or displays information to auditors and further permits such individuals to input and update information. 
     
    
     DETAILED DESCRIPTION OF THE INVENTION  
       [0023]     The present invention may be implemented by programming code modules that are executed by a computer. Generally, program modules include routines, objects, components, data structures and the like that perform particular tasks or implement particular abstract data types. The terms “program” and “module” as used herein may connote a single program module or multiple program modules acting in concert. The invention may be implemented on a variety of types of computers, including personal computers (PCs) and, network PCs.  
         [0024]     An example of a networked environment in which the invention may be employed will now be described with reference to  FIG. 1 . The example network includes several computers  1  communicating with one another over a network  2 , represented by a cloud. Network  2  may include many well-known components, such as routers, gateways, hubs, etc. and may allow the computers  1  to communicate via wired and/or wireless media.  
         [0025]     Referring to  FIG. 2 , an example of a basic configuration for a computer  1  on which the system described herein may be implemented is shown. In its most basic configuration, the computer  1  typically includes at least one processing unit  7  and memory  8 . Depending on the exact configuration and type of the computer  1 , memory  8  may be volatile (such as RAM), non-volatile (such as ROM or flash memory) or some combination of the two. This most basic configuration is illustrated in  FIG. 2  by line  6 . Additionally, the computer may also have additional features/functionality. For example, computer  1  may also include additional storage (removable and/or non-removable) including, but not limited to, magnetic or optical disks or tape. Computer storage media includes volatile and non-volatile, removable and non-removable media implemented in any method or technology for storage of information such as computer readable instructions, data structures, program modules, or other data. Computer storage media includes, but is not limited to, RAM, ROM, EEPROM, flash memory or other memory technology, CD-ROM, digital versatile disk (DVD) or other optical storage, magnetic cassettes, magnetic tape, magnetic disk storage or other magnetic storage devices, or any other medium which can be used to store the desired information and which can be accessed by the computer  1 . Any such computer storage media may be part of computer  1 .  
         [0026]     Computer  1  may also contain communications connections that allow the device to communicate with other devices. A communication connection is an example of a communication medium. Communication media typically embodies computer readable instructions, data structures, program modules or other data in a modulated data signal such as a carrier wave or other transport mechanism and includes any information delivery media. By way of example, and not limitation, communication media includes wired media such as a wired network or direct-wired connection, and wireless media such as acoustic, RF, infrared and other wireless media. The term computer readable media as used herein includes both storage media and communication media.  
         [0027]     Computer  1  may also have input devices such as a keyboard, mouse, pen, voice input device, touch input device, etc. Output devices such as a display  9 , speakers, a printer, etc. may also be included. All these devices are well known in the art and need not be discussed at length here.  
         [0028]     The inventive system and method involves the processing of data, and, as such, includes a data processor and a data warehouse.  FIG. 1  schematically illustrates these elements at reference numeral  3 . Data processor  5  includes the necessary hardware and software to process data. The database software can be any one of several known database engines, or their equivalents, as may be known to persons of skill in the art. In a preferred embodiment, the database software is Microsoft Access, which may be obtained through Microsoft Corporation of Redmond, Wash. However, depending on the amount of data to be processed, as well as the number of concurrent users, it may be desirable to use more powerful database software, such as Microsoft SQL Server, which also may be obtained through Microsoft Corporation. The relevant database software, such as Access or SQL Server, accesses data stored in data warehouse  4 .  
         [0029]     In a preferred embodiment, a Lender Evaluation System (“LES”) of the invention is a Microsoft Access-based software application that resides and operates in the memory  8  of an individual computer  1 , such as those illustrated in  FIGS. 1 and 2 . In this embodiment, the LES obtains data from the data warehouse, but the database engine does not process data at a location remote from the computer executing the LES. Alternative embodiments, however, will be readily appreciated by persons of skill in the art. For example, it is possible to implement the LES through an information server that centrally processes data and publishes a result set that may be displayed by computer  1 . This may be accomplished, for example, by a remote access information server that includes or queries a database engine, which in turn, accesses the relevant data. An advantage of a centrally located data processor is that an auditor may not require unique or special applications on the computer accessing the LES. Instead, the loan auditor may merely direct, for example, a generic web browser (through a uniform resource locator) to access an appropriate information service, such as a web server, which returns a user interface suitable for an LES interactive session with the auditor. The “back end” database software processes queries and other information desired by the auditor, and the information service returns the requested data in a form that may be displayed by the browser. Of course, as is well known in the art, information passed between the client and server computers may be encrypted for security purposes. As will be readily appreciated, a further advantage of this approach is that an audit may be performed without regard to special software on client machines.  
         [0030]     In order to conduct an audit or review data relating to a particular lender, an auditor or other user (“user”) first launches the LES, whether as a separate stand-alone application or as an information server based application. In a preferred embodiment, the LES challenges the user to supply the necessary credentials to access the system, e.g., by requiring input of a username and/or password.  
         [0031]      FIG. 3  illustrates a screenshot  10  of a page displayed on a computer  1  after a user has obtained access to the LES. As is illustrated, the LES returns information pertaining to specific lenders who currently have audits pending from either the current month or prior months or that have been requested or completed during the current month. The displayed data further includes the status of existing or contemplated audits, and the start and end dates of such audits.  
         [0032]     As depicted at the top of the screen, the LES display a three “drop-down” options available to the user: a “Lender” menu item  12 , a “Reports” menu item  13 , and an “Options” menu item  14 . The Reports menu item  13  displays a page (not shown) that allows the user to complete reports pertaining to information contained in the Lender Evaluation System, whereas the Options menu item  14  allows the user to customize the operation of the LES. There is also a “blank doc” button and “open folder” button that allow the user to perform the same tasks as clicking the “Lender” button. Introductory screen  10  further includes a “Close” button  15  and an “Open” button  16 . Selection of the Close button  15  terminates a session, whereas selection of the Open button  16  causes the LES to open a selected audit item. The user selects a particular lender and/or audit item by moving the cursor to the item and clicking the open button  16 . In screen shot  10 , the names of actual lenders have been deleted for privacy purposes, but in practice, the names of such lenders will be displayed on the introductory screen.  
         [0033]     The Lender menu item  12  typically includes at least two options, namely, one to add a new lender to the LES and the other to open a Lender account already present in the LES. When the user selects “add” under this hierarchy, the LES displays the interface  20  depicted in  FIG. 4 . Interface  20  presupposes the existence of a unique identifier for each Lender in the system, which is necessary for the orderly operation of the mortgage insurer. The user inputs this identifier into box  23 , and the LES creates or updates the data associated with the lender and/or queries the user for information pertaining to the lender. After the data is input, the user clicks the “Open” button  21 . It is also possible for the user to exit interface  20  by clicking the “Cancel” button  22 .  
         [0034]     Upon selection of the option to open a particular lender&#39;s records, either by clicking Open button  21  or by selecting the open option from the Lender menu item  12 , the LES displays interface  30  as indicated at  FIG. 5 . As with introductory screen  10 , the names of actual lenders are not depicted in interface  30  for privacy purposes, but, in practice, the LES will actually populate this display with actual lender names. The user may then select the lender via an alphabetic listing by clicking the first letter in the lender&#39;s name. As with prior screens, interface  30  provides the user with an option to continue, by clicking the “Open” button  31 , or to exit, by clicking the “Cancel” button  32 .  
         [0035]     Once an auditor or other user selects a lender or audit item to review, such as through the introductory screen  10  or interface  30 , the LES displays a screen, such as exemplary screen  40 , as depicted in  FIG. 6 . The top area of screen  40  displays certain characteristics of the lender, e.g., lender ID, name, account executive, delegated dollar amount, date approved for delegated business, type of lender, etc. The bottom area includes three folders: “Evaluation” folder  41 , “Special Exceptions” folder  42 , and “Journal” folder  43 . There are also two windows and several other buttons that allow the user to access additional sections of the profile. Special Exceptions folder  42  displays the lender specific guideline exceptions from the application entry system, whereas Journal folder  43  allows the user to keep a follow-up journal of activity as it relates to a specific audit.  
         [0036]     As depicted in  FIG. 6 , the top area of screen  40  shows a history of previously completed evaluations as well as requested and future evaluations. The interface further displays lender contact information, which is managed with the “person” button  44  on the top toolbar. By clicking this button, the user directs the LES to open an interface (not shown) that includes contact information for a particular lender. Once the information has been input or modified, the user may return to screen  40 .  
         [0037]     The bottom area of screen  40  depicts a list of loans requested for a particular evaluation from a particular lender. The displayed loans correspond to the evaluation date in the top window. Included on screen  40  are a series of additional buttons, which in turn lead to different screen displays and interfaces. An auditor uses the “New Evaluation” button  45  to create a new evaluation for a particular loan, the “Add Certificate” button  46  to add an insurance certificate associated with a particular loan, and the “Open Detail” button  47  to view the particulars of a selected loan. Screen  40  further includes buttons, which are depicted but not separately numbered, that allow a user to add or delete evaluations, add or delete associated lenders, print a list of loans to be evaluated and/or print comments.  
         [0038]      FIG. 7  illustrates the interface  50  presented to a user upon selection of the New Evaluation button  45  of screen  40 . Through use of interface  50 , an auditor may designate the assigned underwriter, dates relating to the completion of the evaluation, status, and/or generally create or modify the information associated with the evaluation as depicted. Interface  50  includes a “Save &amp; Close” button  51 , which allows a user to accept the changes made, or a “Cancel” button  52 , which allows a user to end interface  50  without saving changes.  
         [0039]      FIG. 8 , in turn, illustrates the interface  60  presented to a user upon selection of the Add Certificate button  46  of screen  40 . This interface permits a user to choose the insurance certificates for a particular evaluation or to add a certificate to the evaluation. The user selects a particular certificate number  64 , which are not shown for privacy reasons, with the cursor and then clicks the “Add” button  61  at the bottom of interface  60 . Upon clicking the “Close” button  63  on interface  60 , the LES returns the user to screen  40 . In addition, the auditor may print the insurance certificate information by clicking on “Print” button  62   
         [0040]     Upon selection of the Open Detail button  47  on screen  40 , the LES presents a new interface  70  (an associated folder screen is illustrated in  FIG. 9 ), which includes details regarding the evaluation. This interface includes three folder buttons, a “Loan Data” folder button  71  (an associated folder screen is illustrated in  FIG. 9 ), a “Debts/Derogs” folder button  72  (an associated folder screen is illustrated in  FIG. 10 ), and a “Comments” folder button  73  (an associated folder screen is illustrated in  FIG. 11 ). Interface  70  further includes a Special Exceptions folder  74  (an associated folder screen is not shown) that captures information pertaining to an exception to the ordinary underwriting policy to which a lender or loan may be subject. In a preferred embodiment, the Special Exceptions screen (not shown) specifically displays the lender&#39;s exceptions from the application entry system, and displays the same information regardless of how the user accessed the screen. Interface  70  further includes a display of certain characteristics corresponding to a specific loan, such as certificate number, borrower&#39;s name, coborrower&#39;s name, date the loan was reviewed and the lender ID# for the policy the loan was insured under.  
         [0041]     As illustrated in  FIG. 9 , the Loan Data screen associated with the Loan Data folder button  71  includes summary data pertaining to the load. The LES calculates and displays on this screen Debt Ratio and Combined LTV (“CLTV”) from the information entered in the Loan Data and Debts/Derogs screens ( FIG. 10 ). The top of screen  70  further includes buttons, such as the left and right arrow buttons, that allow the user to navigate to different loans in the list. There is also a “print” button (shown as a printer icon) that allows the auditor to print the loan worksheet that pulls all this information into one printed page.  
         [0042]      FIG. 10  depicts the screen/interface  80  associated with the Debts/Derogs folder button  72  on screen  70 . Through this screen/interface, an auditor may input information to that the LES uses to calculate various information associated with a loan, such as CLTV. In addition, an auditor may input a narrative description of derogatory credit items and further provide a code for each such item. As with other displays, the screen/interface  80  includes arrow navigation buttons as well as an “Add” button  81 , which permits a user to add a new certificate from the data warehouse, and a “Close” button  82 , which permits the user to return to the prior screen display.  FIG. 11  depicts a screen  90  that an auditor may use to include comments on a particular evaluation. Screen  90  is multi-functional in that it allows the user to enter comments that are kept on the system or printed on the worksheet. This screen also includes an “Add” button  91 , which permits a user to add a new certificate from the data warehouse, and a “Close” button  92 , which permits the user to return to the prior screen display. This screen further permits an auditor or other user to specify that a comment should print on a “comments sheet” that is printed from the Print Comments button on the lender profile screen. To do this the user would check the box, e.g., box  93 , in the column labeled “Letter.” The last column labeled “Summary” is for the user to identify comments that will print on the final summary report. In the preferred embodiment, the LES presents a drop down menu of predetermined comments, e.g., debt ratio, documentation, income, or property, that appear once the auditor clicks inside the “Summary” column. This enables the auditor to catalog, by predetermined guideline areas, the issues in each comment.  
         [0043]     Upon completion of an evaluation, an auditor directs the LES to display a summary page  100 , as depicted, for example, in  FIG. 12 . In this screen, the LES displays information pertaining to the lender, the number of loans processed and statistical data pertaining to the quality of the lender. In a preferred embodiment, the summary page  100  displays information from current and previous evaluations for comparison. The summary page provides a “Print” button  101  and a “Close” button  102 . Upon selection of the print button, the LES prints a summary of the evaluation as well as any comments that were marked in the “Summary” section of the individual loan worksheets.  
         [0044]     To more completely integrate the evaluation process, the LES further includes interfaces that assist the auditor to compose and print different letters for communicating with lenders. When an auditor invokes this functionality, the LES displays a first interface  110 , as depicted in  FIG. 13 , which prompts the auditor to select the desired letter type, e.g., a no audit letter, a request for specific types of information, or a response. The auditor may thereafter generate a form letter by clicking the “Open” button  111  or exit to a prior screen by clicking the “Close” button  112 .  
         [0045]      FIG. 14  depicts a screen  120 , automatically generated by the LES, that reflects the text of a letter needed to advance the lender evaluation process. Based on the data input to the LES by the auditors or other users through, for example, the screens described above, the LES populates the fields of the letter and generates suitable text. Screen  120  further includes a “Print” button  121  and a “Cancel” button  122 . An auditor may select the text in screen  120  and copy or save this information into a suitable word processor, such as Microsoft Word. The auditor may thus readily create and print the needed correspondence.  
         [0046]     The inventive lender evaluation system and associated methods, as functionally described above, eliminates certain manual and time-consuming tasks. The LES tracks all delegated and package underwritten loans for all lenders based on a single unique identifier associated with each lender. The LES further permits a ready determination of which loans will be audited based on a review of multiple risk factors, as well as, loan closing dates. Correspondence required as part of the auditing process can be created from predetermined and stored letter templates.  
         [0047]     The LES further creates a loan worksheet for each loan and an online summary from the individual loan worksheets. The system, as described above, makes the mathematical calculations, which eliminates the potential for human error. Worksheets relating to each loan are automatically created as the information is entered into the database. On a field audit, staff members can combine databases and export it via email to the home office to eliminate the risk of lost information during travel. This feature permits up-to-date oversight as to status of individual audits.  
         [0048]     As described above, the LES further provides the means to track prior audit data and results for quick comparisons. This feature eliminates the necessity to rely on reviewing microfilm for reporting purposes. Online journals that are maintained for each lender in the LES track the progress of an audit, as it is being completed, and provide flags as to risk factors that may be helpful for future audits.  
         [0049]     The reporting capabilities in the LES system supports the planning and scheduling of future audits and follow-ups. Among other things, the LES generates “Low Volume” and “No Activity” reports that allow auditors to separate and maintain the lenders with little or no volume from the ones that are actively submitting a larger amount of business. These reports are generated from information input to the LES by auditors, such as selecting check boxes  48  or  49  in screen  40  ( FIG. 6 ). In addition, the LES creates and disseminates follow-up reports that are based on lenders&#39; journals. Through these reports, the LES reminds underwriters as to follow-up calls that need to be made on a daily basis. A completed evaluation further provides information on audits completed during a specific time frame and can be broken down based on the type of lender.  
         [0050]     While this invention has been described with an emphasis upon particular embodiments, it should be understood that the foregoing description has been limited to the presently contemplated best mode for practicing the invention. It will be apparent that various modifications may be made to the invention, and that some or all of the advantages of the invention may be obtained. Also, the invention is not intended to require each of the above-described features and aspects or combinations thereof. In many instances, certain features and aspects are not essential for practicing other features and aspects. The invention should only be limited by the appended claims and equivalents thereof, since the claims are intended to cover other variations and modifications even though not within their literal scope.