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During the Audit Although any auditing process is potentially painful, if effectively planned and implemented, this new era of audits can yield a wealth of valuable information for servicers and law firms alike. few basic guidelines for conducting the audit can pave the way to success. Designate a contact person. Both the law firm and the servicer should designate a contact person for the audit. A multitude of questions arise when any audit is conducted. By designating one to act as a go-between, both parties can eliminate the need to send and resend information and avoid the frustration of referrals to multiple people just to track down a single answer. For law offices, the firm's relationship manager is typically the most fitting designee. Provide sufficient preparation time. In order to better manage time and resource restraints, sufficient time should be given for all parties to gather information, schedule travel time, provide for discussion of agenda items, and review. The rush to begin scheduling audits –and conducting them almost immediately after the signing of the consent orders–proved that whenever a project is launched, sufficient preparation time is essential to its success. With that in mind, the following timeline provides useful milestones for the audit. Thirty days prior to the audit. Initial notice of the audit should be given at least 30 days in advance and include estimated start and stop times. This early notification allows everyone to check schedules, confirm dates, and make travel plans. Audits will not be useful if key personnel are not available due to unavoidable conflicts. In addition, a complete list of all servicer personnel making the on-site visit should be given to the firm. This will enable the firm to match the visiting servicer contacts to the corresponding firm representatives best suited to answer questions in that area. Representatives from the legal/compliance, business operations, and IT and support departments may all be necessary. To also ensure the proper firm personnel are present, notice of the audit should include information about which states and/or processes are being examined. Ten days prior to the audit. Detailed agenda items should be provided to the firm 10 business 56 days prior to audit. The law firm should also prepare agenda items at this time. Ten days out is a good time to hold a conference call to discuss the agenda so that the parties can identify demonstrations needed and ensure presentations align with the auditors expectations. Do they want to see an overview of the firm and its key personnel? What is the life of a file? What case management system or other software is used? By identifying the focus of the audit, the servicer can ensure its particular areas of concern are addressed without having to spend time on extraneous matters. The conference call can also be used to identify specific, objective performance measures upon which the audit will be based. Ideally, the measures will be mutually agreed upon. Mandatory measures should be consistent with industry standards, which will allow for comparison with set criteria. To ensure the most thorough answers possible, the client should provide pre-audit questionnaires 10 business days prior to their due date. As with physical attendance at the audits, many key personnel may need to review the questions and the firm's responses, as well as provide their own input. Policies may also need to be reviewed. Be sure to schedule enough time for this review. The coordination of all these efforts itself can be very time-consuming. Ten days prior to the audit is also a good time to provide a loan-level list of files reviewed, if any. Electronic record keeping is the industry norm, and file preparation requires many hours of work printing, copying, and organizing documents. Travel arrangements and start and stop times can also be finalized at this time. Will the auditors work through lunch? As hosts, law firms want to ensure their clients are comfortable. Providing refreshments and even lunch is typical. If there are prohibitions against this, the servicer should let the firm know, along with have any specific needs at the location, such as technology support, private meeting rooms, or access to copiers. Who should conduct the audit? Should the lenders' or servicers' own teams, regulators, other law firms, or financial auditors conduct the procedural reviews? Whoever performs the audit should have sufficient knowledge of the industry to be conversant in the documents reviewed and the procedural and financial requirements imposed by state or federal law. The auditors should also have a working knowledge of Fannie Mae and Freddie Mac directives for both servicers and law firms. The law firm's role. Audits provide a unique opportunity to discuss the challenges the firm faces with the client. What court rules, policies, or procedures impede the foreclosure process? Are there barriers unique to the client conducting the audit? Servicers may not be fully aware of how the practices they employ can delay a foreclosure. An audit is an important opportunity to educate and inform servicers, and they typically appreciate being kept up to speed. After all, both parties are working toward the same goals. The firm should also be prepared to discuss state-, county-, and judge-specific issues that affect the firm's overall timelines and performance for the jurisdiction of the audit. Even if not included on a loan-level list of files being audited, specific files that demonstrate how jurisdictional rules affect performance should be provided to the auditors. Lastly, the firm should utilize the audit as an opportunity to discuss additional services it can provide to that client. Audits showcase how it gives firms a stage to help the servicer streamline operations, find efficiencies, and increase profitability. A Word About Internal Document Requests and IT Auditing One of the biggest challenges to both auditors and those being audited is determining what documents should be asked for and what documents should be provided? Law firms generally consider financial statements, policies and procedures, process maps, and staffing models to be proprietary and/or confidential information. Although the firms will typically agree to provide access during the audit, possibly subject to a signed confidentiality agreement, they will not always agree to provide copies to take away from the audit. Granted, certain documentation is necessary to satisfy the requirements of the OCC consent orders, but careful consideration also needs to be

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