Why Mortgage Quality Control Is More Critical Than Ever in 2026
In an era where mortgage rates have finally dipped below 6.3% and purchase applications are surging 18% year-over-year, the last thing anyone wants is a loan falling apart at the 11th hour. Yet that’s exactly what happens when quality control (QC) gets treated as an afterthought.
As a lender or broker, you’ve probably heard the term “QC” tossed around. But in 2025, with Fannie Mae and Freddie Mac tightening repurchase demands, CFPB scrutiny at all-time highs, and secondary market investors demanding cleaner paper, mortgage quality control isn’t just a compliance checkbox—it’s the difference between a profitable portfolio and a seven-figure nightmare.
Let’s unpack why QC matters more than ever and how Commonwealth can help lenders develop the best practices.
What Exactly Is Mortgage Quality Control?
Mortgage QC is the systematic review of loan files—both pre-funding and post-closing—to catch errors, fraud, regulatory violations, or guideline deviations before they become repurchase requests, fines, or investor kickbacks.
There are two main phases:
Pre-Funding QC – Random or targeted reviews before the loan closes. Think of it as the final safety net.
Post-Closing QC – Monthly random audits (minimum 10% of production per GSE rules) plus discretionary reviews on high-risk loans.
The 2025 Repurchase Wave Is Real
Through Q3 2025, Fannie Mae issued $1.87 billion in repurchase demands—up 42% from 2024. Freddie Mac isn’t far behind. The top three triggers?
Income calculation errors (28%)
Asset verification gaps (19%)
Occupancy misrepresentation (15%)
One mid-sized IMB reported a single $2.3 million repurchase in September because a borrower’s side hustle was counted as income without proper documentation. That’s one loan wiping out profit on 40 clean ones.
With a strong pre-funding QC program, these items are caught before the loan is sold.
Regulatory Heat Is Turning Up
The CFPB fined three lenders a combined $44 million in 2025 for “systemic quality control failures” that led to fair-lending violations. Regulators aren’t just looking at outcomes—they’re demanding proof of robust, documented QC programs.
Fannie Mae’s updated Selling Guide (Oct 2025) now requires lenders to report QC findings quarterly and demonstrate corrective action within 60 days.
Investor Demands Have Evolved
Warehouse banks and aggregators are no longer satisfied with a 10% post-close sample. Many now require:
Pre-funding QC on all loans >90% LTV
Third-party QC on non-QM and bank-statement loans
Real-time defect tracking dashboards
One warehouse line provider has told me they will cut a correspondent’s warehouse line by 50% if defect rates exceed 4% two months in a row. In 2025, bad QC literally costs you access to capital.
The Hidden Cost of Skipping Corners
Let’s run the math on a $500 million monthly originator:
That is a $15 million swing—enough to hire an entire QC department twice over.
And it not only hits large limits. You can scale these figures down to the size of your organization. If you are a $5 million a month originator (Roughly 15 loans per month based on current loan sizes), you could be facing a $125,000 annual hit for repurchase exposure.
Best Practices for Winning the QC Wars in 2026
When looking at what lenders are doing to improve their loan quality, the best are not just checking boxes. Here is what we are seeing from our QC customers at Commonwealth.
100% Pre-Funding on High-Risk Loans – DSCR, bank-statement, recent credit event, and 95%+ LTV loans get full QC before docs are drawn.
AI-Powered Early Warning Systems – Lenders and Commonwealth contract underwriting uses tools like Fannie Mae’s CU risk scores and third-party fraud engines to flag files for extra review before underwriting approval.
Layered Verification - Income via tax transcripts + payroll data; assets via Plaid + bank statements; employment via The Work Number + verbal re-verification.
Third-Party QC Partnerships – When lenders outsource post-close audits to firms such as The Commonwealth Group, it reduces bias and satisfies investors that the QC processes of the lender are separate from their production areas.
Defect Taxonomy & Root-Cause Tracking - Every finding is categorized (income, asset, liability, etc.) and tied to the originating team for coaching.
Monthly QC Scorecards Published Internally - Loan officers see their personal defect rates. Competition drives quality up fast.
The Bottom Line: QC Is Profit Protection
In 2026, the mortgage game isn’t won on the rate sheet. It’s won in the QC room.
The lenders thriving right now treat quality control like a profit center, not a cost center. They close more loans, keep more servicing, avoid repurchases, and sleep better at night. For mortgage lenders, a question to ask is “When was the last time your QC plan was stress-tested?”
If you have not reviewed your QC processes in the last 12 months, this should be done immediately. In today’s market, the only thing more expensive than good quality control is bad quality control.
If your company is ready for a review, contact us at The Commonwealth Group to discuss your QC results and what Commonwealth can do for your QC program. Commonwealth offers consulting services for QC analysis and also performs QC as a third-party vendor in compliance with agency requirements.
Contact Martin Luplow at [email protected] for more information.
West Beibers, CMB, AMP, CRU
Chief Executive Officer
The Commonwealth Group Companies