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Quality Control and Post–Closing Management Conflict of Interest

Q: Is it a conflict of interest for my company's Quality Control (QC) Manager to also be in charge of Post–Closing? Post–Closing is not a production role but it does fall under Operations and I want to make sure my organization stays compliant with regulators and investors.

A: If the Quality Control (QC) Manager is not part of the loan production staff or part of the loan administrative process there should be no issue. That said, if the Quality Control (QC) Manager is involved in endorsing, insuring or servicing FHA loans then that individual is not permitted to be involved in the QC process as set forth in the HUD Handbook 4000.1. "The Mortgagee must ensure that employees who perform QC Program functions are, at all times, independent of all Loan Administration processes and do not directly participate in any of the Loan Administration processes represented in the QC Plan. The Mortgagee must ensure QC employees are not within any chain of reporting or management that is directly connected to Loan Administration staff" (pg. 912).

The HUD definition of Loan Administration refers to all aspects of the FHA mortgage lifecycle, including origination, underwriting, closing, endorsement, and servicing of FHA-insured Mortgages that are governed by FHA policies and procedures (pg. 910).

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