Internal Control Questionnaires and Verification Procedures

Other Areas of Interest

  1. Does the bank take steps to determine whether there are any environmental hazards associated with the real estate proposed to be mortgaged?

  2. When there is reason to believe that there may be serious environmental problems associated with property that it holds as collateral, does the bank:

    1. Take steps to monitor the situation so as to minimize any potential liability on the part of the bank?

    2. Seek the advice of experts, particularly in situations where the bank may be considering foreclosure on the contaminated property?

  3. Are all real estate loan commitments issued in written form?

  4. Are loan officers prohibited from processing loan payments?

  5. Is the receipt of loan payments by mail recorded upon receipt independently before being sent to and processed by a note teller?

  6. Regarding mortgage documents:

    1. Has the responsibility for the document files been established?

    2. Does the bank utilize a check sheet to assure that required documents are received and on file?

    3. Are safeguards in effect to protect notes and other documents?

    4. Does the bank obtain a signed application form for all real estate mortgage loan requests?

    5. Are separate credit files maintained?

    6. Is there a program of systematic follow-up to determine that all required documents are received?

    7. Does a designated employee conduct a review after loan closing to determine if all documents are properly drawn, executed, and in the bank’s files?

    8. Are all notes and other instruments pertaining to paid-off loans returned promptly to the borrower, cancelled and marked paid, where appropriate?

  7. Regarding insurance coverage:

    1. Does the bank have a mortgage errors and omissions policy?

    2. Is there a procedure for determining that insurance premiums are current on properties securing loans?

    3. Does the bank require that the policies include a loss payable clause to the bank?

    4. Are escrow accounts reviewed at least annually to determine if monthly deposits will cover anticipated disbursements?

    5. Do records showing the nature and purpose of the disbursement support disbursements for taxes and insurance?

    6. If advance deposits for taxes and insurance are not required, does the bank have a system to determine that taxes and insurance are being paid?

  8. Are properties to which the bank has obtained title immediately transferred to the “other real estate owned” account?

  9. Does the bank have a written schedule of fees, rates, terms, and types of collateral for all new loans?

  10. Are approvals of real estate advances reviewed, before disbursement, to determine that such advances do not increase the borrower’s total liability to an amount in excess of the bank’s legal lending limit?

  11. Are procedures in effect to ensure compliance with the requirements of government agencies insuring or guaranteeing loans?

  12. Are detailed statements of account balances and activity mailed to mortgagors at least annually?

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