Pre Funding Quality Control: Last Checks Before Money

Pre funding quality control is an independent review of a sample of approved loans after underwriting and before the money moves. A reviewer outside production re-verifies income, employment, assets and the bank statements behind them, and confirms the file matches what was approved. A material finding holds funding until it is fixed or the decision is changed.

What is pre funding quality control?

Pre funding quality control is a second look at selected loans, done by people who did not originate, process or underwrite them, in the window between approval and funding. Underwriting decides the loan. Post-closing quality control reviews it after the fact. Pre funding review is the last point where a mistake can still be corrected for free.

Independence is the core of it. Fannie Mae's Selling Guide section on the lender prefunding quality control review process says these reviews must be done by individuals with no involvement in the origination, processing or underwriting of the loan they review. Lenders who sell to other investors or hold loans themselves often adopt the same separation, because a reviewer checking their own team's work tends to see what they expect.

The review works best when the file explains its own decisions. An underwriter's written summary of how income was calculated and why each large deposit was accepted lets the reviewer test the reasoning rather than reconstruct it. The guide to writing an underwriting narrative covers what that summary should say.

Which files should pre funding quality control sample?

Pre funding quality control should sample files every month from each production channel, weighted toward the products, sources and loan features that carry more risk. A flat random pick spreads attention evenly when the risk is not even. Most lenders combine a small random sample with targeted picks.

The same Fannie Mae section requires a documented monthly selection that reflects the lender's view of risk across channels, volume and product mix, with selections from each production channel. Within that, targeted picks often come from:

• Products with built income, such as bank statement only loans, where deposits replace tax returns as the income source.
• New brokers or loan officers in their first months of submissions.
• Files with exceptions to a guideline or overlay.
• Late changes, such as a loan amount increase or a new account added after approval.
• Patterns from earlier findings, for example a source whose files showed income errors last quarter.

Selection has to happen early. Fannie Mae's guidance says reviews must start soon enough in the process to allow time to make selections, and a file chosen the morning of funding leaves no time to act on what the reviewer finds.

Re-verifying income, assets and bank statements in pre funding quality control

Re-verifying in pre funding quality control means checking the file's key facts against sources outside the file where possible, and recalculating the figures the decision depends on. For a bank statement loan, that covers the deposit totals, the excluded items, the expense method, the business's existence and ownership, and the funds needed to close and for reserves.

A reviewer typically works through these steps:

1. Employment and business. Confirm the business is active and the borrower owns it, through a public registry, the licensing body or a verbal check.
2. Income. Recalculate monthly deposits from the statements, remove transfers between the borrower's own accounts and other non-business credits, and apply the program's expense method. Compare the result with the underwriter's.
3. Statement authenticity. Look for edited or retyped statements: fonts that change mid-page, balances that do not chain from month to month, totals that do not add.
4. Assets. Confirm funds to close and reserves are present, sourced and seasoned as the program requires.
5. Data integrity. Check that the figures entered in the loan system match the documents.

Recalculating deposits by hand takes most of the reviewer's time on these files. TrueBankFlow totals deposits month by month and links every figure to the statement line behind it, so a reviewer can check the underwriter's income against the source quickly.

Pre funding quality control findings that stop funding

Pre funding quality control findings that stop funding are ones that change whether the loan should close or on what terms: income that no longer supports the debt-to-income limit, assets that cannot be sourced, a document that appears altered, or a fact the borrower misstated. Clerical findings that do not change eligibility are logged and corrected without holding the wire.

Findings that hold funding, as examples:

• Recalculated income falls far enough to push the ratio over the program limit.
• A large deposit used for funds to close has no source.
• A statement fails a balance chain or shows signs of editing.
• The business cannot be confirmed as active.

Findings that are logged but do not hold funding, as examples, include a misspelled employer name in the loan system or a missing date on a document whose content is otherwise verified.

When a file cannot be fixed in time, the options are to restructure, to decline, or in some cases to move the borrower elsewhere. The guide to transferring a loan file to another lender covers what moves with the file.

A pre funding quality control review of one bank statement loan

A pre funding quality control review of one bank statement loan follows the file from selection to release. The example below is a fictional 12-month business bank statement purchase loan, selected because the broker is new. Every figure is an example.

The loan funded, but the finding still counts. A transfer counted as income is a pattern worth watching across the broker's later files. If deposit recalculation is the slowest part of your review, request early access to TrueBankFlow.