The Evolution Of Mortgage Banking Compliance

The mortgage document preparation was a simple process thirty-plus years ago. Within 48 hours, you prepared a set of documents on an IBM Selectric typewriter, sent them to a title company with a note to close, and then shook the hands of a happy new homeowner.

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In the same span of time that witnessed the typewriter’s evolution into a handheld supercomputer built for efficiency, the regulatory system in equal opposition swelled in complexity. For lenders, maintaining a profitable origination business is often hindered by the ever-changing and ever-growing regulatory landscape. Unable to keep up, lender’s tend to respond with knee-jerk reactive solutions that risk heavy fines for minor oversights.

The emerging financial tech (FinTech) and regulatory tech (RegTech) sector has produced a number of Software as a Solution (SaaS) products and tools to help compliance teams. But they too come with their share of challenges. For one, tools require people to learn, implement, oversee, and manage them, and human error is a natural result. Second, many legacy tools are maintained by companies whose primary expertise is in software, not compliance, which exposes users to potential compliance risks. On the flipside, outdated software exposes lenders to potential security risks. Both can result in millions of dollars of recovery costs.

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Unfortunately, the DIY solution to maintaining compliance would take thousands of hours of research and manpower to implement policies that adhere to federal and state regulations. The need for compliance, data, technology, and management to exist within the same ecosystem is greater than ever. The best-in-class solutions are cross-bred Compliance Management Systems (CMS) built by software engineers and maintained by a team of experts steeped in financial law and regulatory compliance knowledge.

Effective compliance management ecosystems can and have served the financial services industry for the better. They are also supported – and even encouraged – by the federal government. The more comprehensive a CMS, the more the CFPB says it will believe in a bank.

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With an all-inclusive approach, institutions can access a number of compliance solutions including dynamic document preparation, data validation and testing with legal backing and HMDA, CRA, REMA, geocoding, and Fair Lending. The right solution will improve the agility and speed of these diverse compliance solutions across an enterprise in a controlled, transparent, and organic way.

And while the industry thinks of CMS as being proactive and offensive, it is also a good defense. Think of it like a well-protected house: the more prepared you are for a break in, the less likely it is to happen.

For an industry that has been slow to innovate, the emergence of a sustainable, smart, and reliable compliance ecosystem fosters a pioneering environment in which to manage regulatory changes.

These expertise-fueled compliance ecosystems can empower financial institutions to respond agilely to the ever-growing regulatory landscape. And by alleviating the burden of regulation, banks can focus on profitability knowing it is no longer a weight they need to carry alone.

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