As a lender, we believe your focus is, increasingly, on generating and maintaining a profitable origination business in this volatile market. Constantly worrying about the enormous and ever-changing regulatory landscape can be an unwelcome interruption. Your burden is too great, and the risk is too high, to rely solely on internal staff, or outdated doc prep, to provide legally defensible compliance in the origination process.
As regulatory pressures mount, there is an immediate and compelling need to re-evaluate and update your institution’s capacity to continuously analyze and competently implement mandated changes. This impacts your ability to produce compliant disclosures and documents for all your lending needs.
As a lender, document preparation is always a major concern. The smallest error or omission can lead to:
>>Regulatory Fines & Damage Settlements. Failure to prepare documents in a way that aligns with both local and federal regulatory requirements can result in fines from regulators as well as class-action lawsuits from borrowers. These fines could drain millions of dollars from a lender’s cash flow.
>>Reputation Damage. The inevitable negative press that accompanies any kind of lending violation could impact the lender’s public reputation. The specific effects of such a blow to a lender’s reputation will vary from case to case but could result in lost loan origination opportunities or drive away potential business partners.
>>Restrictions on Lending Operations. Some lenders may face official restrictions on their lending operations as a result of a regulatory compliance violation.
What Should a Compliant Document Solution Roadmap Include?
The ideal solution must include compliance and legal guidance, dynamic document technology, and industry expertise, to help you navigate these challenging market conditions.
To be more specific, the ideal compliant document solution mitigates your risk and provides you with a competitive advantage by delivering:
Total Residential Loan Program Coverage
One major problem is that most doc vendors specialize only in a few document types or in one region—forcing lenders to retain multiple vendors to cover all of their verticals & markets.
The ideal solution provides a 360º solution beginning with initial disclosure and ending with post-closing services while encompassing everything in between. With this total coverage, lenders can simplify their processes because they no longer need to seek out multiple providers.
Specialization in a Wide-Ranging Product Mix
Using a special team of lawyers with long careers in the home lending industry, the ideal solution offers expertise in numerous specialty products (or common products with unique characteristics) such as:
>>Texas Residential Loan Documents – Texas is unique in the nation because it requires home loan closing documents to be prepared by a Texas licensed attorney. The ideal solution has a team of Texas licensed attorneys who prepare all Texas document sets more efficiently than the competition and in perfect compliance.
>>One-Time Close Construction to Perm Loan Documents – The ideal provider works with lenders to customize their one-time close documents to fit their specific construction-lending program.
>>HELOCs – Each lender configures their HELOC program differently and the ideal provider can work with any lender to customize their document solution to adhere to their unique program. Many doc prep providers are unable to customize their HELOC documents.
>>Post-Closing documents– The ideal solution provides documents for loan assumptions, loan modifications, lien releases and FHA and USDA partial claim mortgages.
>>Complex characteristics – The ideal solution specializes in the unique and complex where other vendors cannot. For example, the ideal solution can provide documents for loans where the borrowers are a double trust.
This ability to focus on specialty products that other doc prep vendors often don’t carry helps provide complete compliance for lenders in different markets and verticals, while maintaining overall disclosure and document uniformity across the lender’s entire product mix.
Built-In Compliance Checks
The ideal solution runs compliance checks of each and every closing package it produces to ensure it is in compliance with the requisite federal and state regulations. These checks include (but are not limited to):
>>State Consumer Credit Laws
The ideal provider creates, manages, and integrates these checks internally—many vendors have to run these checks through an additional, outsourced product such as Mavent, Compliance Analyzer, or Pred Protect.
The ideal provider is confident enough in this internal compliance system to warrant the accuracy of its calculations, disclosures, and document packages (and to back these warranties with $10 million in E&O insurance).
Seamless Loan Origination System Integrations
The ideal solution is integrated with the majority of the largest Loan Origination Systems (LOS) on the market and can integrate with any LOS provider.
No Redraw Fees
When a loan officer orders a closing package, there’s often a need to order another closing package a little later (usually because of user error or last minute adjustments) to complete the closing. On average, a lender will order about 2.5 closing packages per closing.
Most doc prep vendors charge a fee for ordering an additional closing package. This inflates the cost of each closing and, worse yet, these redraw fees cannot be passed on to the consumer. Lenders have to eat the redraw fees of most doc prep vendors out of their own pocket.
However, the ideal provider does not charge for redraws, so lenders are only charged once for a closing. This saves expenses and removes an element of stress from the process.
Not All Document Solutions and Vendors Are Created Equal
MRG Docs is our powerful platform for the dynamic creation and seamless delivery of perfectly accurate residential mortgage documents. Our disclosure, closing document and servicing document solutions combine years of real estate law experience and in-depth regulatory insights with state-of-the-art technology to competently document mortgage transactions. Each document package is delivered with a series of built-in checks to guarantee compliance with applicable state and federal regulation.
MRG’s team of attorneys and mortgage experts recognize the business imperative of proactively monitoring and continuously analyzing regulatory changes, trends, and impending regulations that impact your business. Our team of attorneys is constantly on alert for changes from all federal, state, local, and investor requirements to provide you with up-to-date compliance from a source you can trust.
About The Author
Michael L. Riddle is the managing director of Mortgage Resources Group, LLC., responsible for the overall operations of the firm. He guides the teams within the firm that develop and deliver “best in class” compliant disclosure and documentation systems to single family mortgage lenders throughout the country. Mr. Riddle is the co-founder and managing partner of the Middleberg Riddle Group, one of America’s preeminent mortgage banking law firms and, in that role, has spent much of his 40 plus year professional career providing advice and legal counsel concerning regulatory compliance, enforcement and litigation to clients including banks, mortgage lenders, insurers and related financial service entities.