We know that Internal Audit groups are under pressure! Your bank’s or mortgage company’s Internal Audit team needs to address the growing number of complex and material operational and/or financial risks. These risks require analysis and a decision regarding your audit scope and processes to be used. Hilltop Advisors can help you meet those responsibilities and work with your team to audit such high risks. Having worked with many Internal Audit teams, we know that each has different strengths but few have all of the skills needed to audit the high-risk areas.
The following audit risk areas need your attention as these risks are new, more complex and/or changing and Hilltop can help:
- performing PPP audit compliance – especially the borrower forgiveness applications,
- reviewing policies and evaluating whether processes for SBA loans (7a, 504 and PPP loans) are compliant with the entity’s policies and SBA regulations,
- assessing the existence and effectiveness of the SOX controls that have been identified,
- reviewing compliance requirements for the new Main Street Loan program,
- auditing the commercial loan risk ratings and calculating CECL/ALLL loan loss reserves,
- reviewing all other Regulatory Compliance Requirements for lending and loan servicing,
- Anti-Money Laundering compliance and performing “Follow the Money” assessments,
- assessing mortgage banking operational, regulatory compliance and financial risks (the mortgage business is different than the commercial lending business and bank auditors often do not have the necessary industry knowledge and/or the ability to identify risks),
- assessing compliance with Federal mortgage payment deferral programs, forbearances, loss mitigation/loan modification and foreclosure required processes (Fannie Mae, Freddie Mac, CFPB, HUD and private mortgage investor),
- Review calculation/accounting/reconciliation/recovery of servicing advances (P&I, T&I, Replacement Reserves, foreclosure costs, etc),
- auditing counterparty risks with a higher degree of skepticism because of the pandemic’s impact on the following counterparties:
- guarantors on commercial loans,
- third party loan originators (correspondent, broker or other lending sourcing relationships),
- trustees for securitized loans,
- loan servicers,
- mortgage warehouse borrowers,
- key vendors for services provided to your company (loan subservicers, systems providers, insurance companies, settlement companies, real estate tax services,
- bank participants in commercial loans,
- buyers of your company’s loans (including the GSEs), and
- any other major businesses that expose your company if their business failed,
- reviewing the requirements of the Pooling & Servicing Agreement (PSA) used for securitized pools of commercial, multifamily, mortgage, other loans and credit cards (securitization trusts, GSEs, Wall Street and other investors) to establish standards that the pool issuer and servicer must meet (i.e. can the issuer/servicer meet financial, operational, regulatory and the covenants), and
- assessing other risks including emerging credit problems, regulatory non-compliance, financial statement “creativity”, possible frauds, high valuations for collateral.
Why should you speak to Hilltop?
- The current risk environment requires more industry experienced auditors to address the specific industry risk challenges (our top 3 senior team members have 145 years of experience and each of our financial services professionals average 17 years of experience with 40% of the team being CPAs/former auditors).
- Hilltop’s team specializes in auditing/reviewing the following:
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- commercial loan risk ratings (CRE, C&I, ADC, MF, SBA, Warehouse lines, etc.),
- loan loss calculations,
- regulatory and contract compliance,
- loan sale or securitization transaction accounting, financial modeling of the securitized assets and compliance requirements (Reg AB and the PSA requirements),
- loan servicing forbearances, modifications and foreclosures, and
- credit, counterparty, interest rate, valuation and other risks unique to the lending and servicing operations.
- identifying/assessing exposure for new/emerging enterprise risks.
- Hilltop’s industry specialized fraud/forensic accountants were engaged by DOJ to map and identify the entire fraud process (the largest mortgage and warehouse lending fraud in the past 40 years) as perpetrated by TBW and caused Colonial Bank to close (its warehouse lender). Our CEO has led more than 350 fraud investigations.
Hilltop is ready to help your team meet the audit requirements and related staffing needs (either in an augmentation role or as an independent reviewer on behalf of Internal Audit). We would like to discuss how your Internal Audit team is positioned to address the many risk areas/challenges and how Hilltop can help increase your audit risk coverage. Please let us know when you have time on your calendar to talk.
