Loan origination and closing production are dependent upon some form of document preparation and, unlike some other products or services in the marketplace, the need for documents has often been reduced to shopping for the best transaction price as opposed to an evaluation of how the selection of a document preparation provider can effectively mitigate compliance risk in the origination process. The general assumption is that there are enough document preparation companies in the market that provide the same product and service so, consequently, the lenders must be able to get it at the price point they want. The reality is that there is a qualitative difference in the type of document preparation products and services available to the lending community.
Lenders do not necessarily seek ‘in depth’ information about document preparation providers if they are basing their decision on price alone. Having knowledge about what a document preparation provider actually does is dependent upon a Lender’s willingness to complete serious due diligence, with the document provider and within their own organization, to ascertain the best fit for their business processes. Lenders should insist that the team responsible for making document provider choices is completely informed as to the nuances of document preparation.
Maintaining Compliance Standards – Setting The Bar
The landscape of the regulatory environment is constantly evolving and changing. What lenders and vendors alike need to develop and program to create a completely compliant closing documentation process is now quite overwhelming. Questions that should be asked during the due diligence phase are: What constitutes accuracy? What is the guarantee that the document packages being produced are compliant (both with respect to federal and state specific regs)? Are there data validation and compliance tests run? Are the content, calculations and compliance tests in the document package legally auditable and defensible? Does the vendor have in-house experienced, knowledgeable industry attorneys and support staff to respond, in real-time, to complex issues and questions?
The key to effective due diligence is to address these questions with each given document provider and to be certain that regulatory compliance is a core competency within the provider’s business processes. This enables a lender’s compliance department to use the document preparation process to manage regulatory risk and to foster a culture of compliance across the lender organization.
In addition, a powerful dynamic content engine with the rules to get the right product generated, into the right business channel, and deployed is paramount. If a lender is producing loans in one state or multiple states and any rules have changed, it can be a major undertaking to adjust a form or package of forms. The document preparation vendor’s software must be designed such that it is completely automated, no matter what the state, product, program or circumstances are. The ability to have the assurance of guaranteed compliance from disclosure through closing, and in sync, is critical, particularly in this de novo TRID era.
Exceptional Quality Service
Above all, no matter how automated the process is with respect to technology and compliance services there is no substitute for the human element. It speaks to the heart of what should always be taken into consideration. One simply cannot put a price on the depth, breadth and years of experience and knowledge that go into every aspect of the document cycle for any loan product or program.