To effectively review bank mortgages, focus on verifying documentation accuracy, assessing borrower creditworthiness, ensuring regulatory compliance, evaluating risk exposure, and confirming legal adherence. Key steps include verifying income stability through pay stubs and tax returns, analyzing credit history via FICO scores and debt-to-income ratios, cross-checking property valuations with appraisals, and auditing compliance with federal regulations like the Truth in Lending Act (TILA) and Home Mortgage Disclosure Act (HMDA). Additionally, review loan terms for fair lending practices and assess the bank’s risk management framework, including loan-to-value (LTV) ratios and default mitigation strategies.

The importance of rigorous mortgage reviews stems from preventing systemic risks and ensuring fair lending. For instance, the Federal Reserve reports that approximately 20% of U.S. mortgages issued between 2012 and 2016 contained material underwriting defects, contributing to rising default rates during economic downturns. A 2022 Consumer Financial Protection Bureau (CFPB) study found that 15% of borrowers with LTV ratios exceeding 95% faced higher delinquency risks, highlighting the need for strict LTV thresholds. Furthermore, the FDIC attributes 30% of bank failures since 2000 to poor mortgage underwriting, underscoring compliance failures. Regulatory bodies like the Office of the Comptroller of the Currency (OCC) mandate rigorous audits to mitigate these risks, as seen in their 2023 guidance emphasizing stress testing for mortgage portfolios. Data from the Mortgage Bankers Association (MBA) reveals that banks with robust compliance frameworks reduce litigation costs by 40%, reinforcing the economic rationale for thorough reviews. Ultimately, systematic mortgage reviews protect lenders, borrowers, and the broader financial system by aligning practices with risk-based standards and regulatory expectations.