Our Compliance Journey


John-ListonFor the past two years we’ve all been talking about TRID compliance. Now that the deadline has come and gone, I think it’s instructive to discuss how technology vendors handled this big challenge. In our case, when Associated Software Consultants, Inc. (ASC), the developer of the PowerLender Loan Origination System, first became aware of the looming regulatory requirements that comprise what we now know as TRID, namely the delivery of a new loan estimate and closing disclosures documents, they hatched the idea of developing a solution within the LOS itself, rather than have their clients rely on doc prep vendors. After combing through the initial regulation specs beginning in late 2012, ASC determined that there could be literally thousands of variations of the forms required to deliver the final documents. Maintaining a vast series of boilerplate docs and using line coordination to map the data was barely feasible and certainly not practical. They focused their energies on using PowerLender’s dynamic document generation capability, which employs XML mapping, to determine the correct series of documents to generate in order to fulfill the TRID requirements.

While working on development of the solution and subsequent upgrade to PowerLender, ASC wrote and distributed two comprehensive guides for their end users to aid in the preparation, implementation and testing of the PowerLender TRID solution. The first was the Setup guide, which outlined the procedures that users were required to execute ahead of the software upgrade. The second guide outlined in detail the procedures required to map the data generated in PowerLender to the forms, to be employed after the upgrade had been installed.

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Chelsea Groton Bank, a billion-dollar bank located in Groton, Connecticut, has been using PowerLender since 2003. Rachel Carlson, AVP and Retail Loan Operations Manager, is a self-described ‘technical person’ and ‘well versed’ in PowerLender’s business-rules flexibility commented on how ASC and PowerLender prepared their institution to generate the loan estimate and disclosure documents. Here’s her story:

We first began the preparation process for accepting the PowerLender TRID solution in the fall of 2014 when we began gathering information and analyzing the setup manual that ASC had prepared and distributed to PowerLender users. We then went through our own internal audit to determine the work that was needed to get our PowerLender system ready for the programming update. During this time, we consulted often with the PowerLender support team who were not only available at our convenience, but were extremely thorough with their answers and also provided clarity on issues to satisfy my ‘technical’ inquiries.

I can’t say enough about how useful the Setup guide has been, we wouldn’t have been able to do this project without it. It has been amazing.

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When the software upgrade was ready the next spring (2015), we installed it on our test environment. This is a very valuable feature of PowerLender, which allows us to simulate all of the aspects of our current configuration for use in testing without compromising our production environment. We then began mapping the required field using the mapping guide that ASC had provided. As soon as we had fields mapped, we began printing docs to see how things were coming out of the system. Our testing process continued in this manner, mainly printing and checking the docs as we made our way through our different loan programs that we offer.

In conjunction with the actual mapping and testing procedures, we have developed an in-depth training program for our staff based upon their roles. Our loan officers obviously need to be very familiar with the loan estimate and have the ability to explain it to borrowers, and all of our back office processors and underwriters will get an in-depth training as well. As for the closing disclosure, we are still determining what roles will receive the various levels of training that we have developed, while focusing on the ability to explain all the details to the borrower at the closing table. We have a group that has been creating our training program and it has been very essential in getting us ready.

We are fortunate to have been on this fast track for getting the TRID documents produced because it has allowed us to develop a thorough training program that is tailored to all the different roles we have at the bank. This has also helped tremendously to allay any fears the staff may potentially have developed over the past few months when they read or heard about potential changes to the regulations. This training has given them confidence to not only understanding the regulations, but providing confidence that they can handle them should they occur.

In talking with other colleagues who use different systems, I think we are so far ahead of them in terms of being prepared. As I said, the guides were very well put together and thought out and on the items where I had a little confusion, the PowerLender support staff was always available to help.

In implementing this change, everyone wishes we had more time. We did get a little reprieve from the CFPB, but I feel that the guides, the updates, and the rollouts of the system patches are examples of the commitment of the PowerLender people to getting their clients ready. The patches, which seemed to be issued every two weeks, were in direct response to PowerLender users who were testing the solution and reporting back to them what changes were needed and their response was phenomenal, I can’t say enough about the support we received from them.

We achieved success in part due to the commitment of our people to this project. This was a large undertaking for us because we offer a variety of products in PowerLender. Not only did we have to deal with this new regulation, which we understand is part of the territory, but we also had to maintain our lending operation as well. I cannot stress enough the efforts of our people and the PowerLender team that supports us. We strove to keep moving forward on this and when we encountered an issue, we were able to make adjustments and move on which, again, shows the dedication of everyone involved.

In terms of having a good relationship with a service provider, really any service provider, is the ability to have open, constructive communication from both sides. Having a service provider who is responsive is a huge part, as we have dealt with many who are not, but the important thing is dialogue. Every issue that I have come across, either with my end users or with setting up PowerLender, I have been able to either call or email and get a prompt response or engage in a consultation to work out the issue. As I’ve said, we have had non-responsive service providers in the past and when you encounter that, you just say ‘forget it’ and move on; however, this was not an issue with PowerLender, and we are thankful because we simply could not have just ‘moved on’ without their guidance along the process. Knowing that they were there for us lifted a burden from our shoulders.

What we hear from some of our common vendors that we share with our competition is that other lenders are saying everything from ‘yes, we’re ready and set to go’ to ‘I don’t know how this is going to get done…we’re not even close’ when they are asked if they will be ready for October 3rd. To be fair, it’s hard to gauge everyone’s true feelings because it hasn’t hit yet, so nobody really knows.

But I feel for us, having a well thought-out plan, specific setup and mapping guides, thoroughly tested software upgrades and timely updates coupled with highly interactive guidance and support makes a big difference and gives us a huge level of confidence that has made this large and complex project much more manageable.

We know we’re on the right path. We have the support of our LOS and the PowerLender people, and we’re going to get there together.

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Tick, Tock, Time Is Running Out

Tick…Tick…tick…a familiar sound to all of us. A reminder to hurry, a call for action, perhaps, but most definitely, it’s the sound of time running out.

For mortgage lenders, time is speeding by at a rapid rate as the August 1st deadline to comply with the CFPB’s new disclosure requirements swiftly approaches. When asked this question: ‘Is your organization prepared for the CFPB requirements deadline?’ lenders have generally answered in one of two ways. One is: ‘We think we’re going to be fine.’ The second is: ‘We have no idea.’ While the former answer appears to be considerably better than the latter, the truth is that neither answer is very good, especially with the clock running.

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Lenders appear to be ambiguous on the matters of what is required of them and what their options are toward a solution. What most lenders are very clear on are the consequences that would result from non-compliance. No one wants to face costly fines, penalties or suspension of mortgage lending and no one wants to think of the impact these might have on their business reputation.

The lenders who think they are on the right track to compliance should already have seen what their disclosure documents are going to look like. They should know exactly what data is required on the docs and how it is going to get there. They should already have full understanding of what the impact of delivering the new disclosures is going to have on their lending operation. If they are employing a document delivery entity or a web service to generate the docs, they need to know exactly what the preparation, implementation and testing costs will be in both hours and dollars. They need to know if and how these solutions will impact the processing time and the cost of their mortgage loans. By now, lenders should have done at least some preparation toward compliance.

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However, all is not lost, even to those lenders who not certain as to their status on the CFPB. How many games have we witnessed teams revealing their winning fortitude in the last two minutes or during their last at-bat? Much information is available as to the requirements of the CFPB and the differing approaches that are available to delivering the disclosures. A concentrated effort coupled with a measured approach in finding the right solution for August 1st and beyond can be the key to success. Lenders who look can look beyond the deadline and understand that other regulatory requirements are looming may be in a better position to choose a solution that can better prepare them for the changes that may come along.

While it is most definitely ‘go time,’ lenders should fully understand the impact that these new regulations will have on their operation and should apply clear thinking in their approach to finding a solution that allows them to continue their mortgage lending operation and avoid penalties, all while being cost-effective and allow them to embrace future regulations with little additional effort. Time may be running short, but it is not too late.

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Correspondent Lending Made Easier

As more lenders look to increase their correspondent lending channel, the smart ones are turning to technology to boost this emerging line of business. For example, Data-Vision Inc., a provider of Internet lending technologies that enables mortgage lenders to quickly and affordably implement Web portal and e-lending capabilities, and Associated Software Consultants, Inc. (ASC), developer of the PowerLender Loan Origination System, today announced that Farmington Bank has successfully launched its new Correspondent Lending Portal (CLP). Here’s how it all came together:

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“Being able to provide an electronic lending portal to our correspondents is imperative in today’s banking market,” stated Jim Wilson, senior vice president and director of residential and consumer lending at Farmington Bank. “The CLP solution allows us to streamline processes and significantly increase production while driving cost efficiencies.”

Data-Vision’s Correspondent Lending Portal (CLP) offers a real-time cloud-based link between Farmington Bank and its correspondent lenders. Deeply integrated with PowerLender by Associated Software Consultants (ASC), Data-Vision’s CLP provides a robust solution for pricing, registration, and ongoing communications for correspondent lending. By working directly with ASC and Farmington Bank, a joint client, Data-Vision was able to offer a system that benefits both Farmington Bank and their correspondents.

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Data-Vision President, Randy Schmidt, stated, “The collaboration with ASC was exceptional, which allowed us to deliver this powerful solution to Farmington Bank. The CLP solution delivers real-time pricing, immediate registrations, pipeline management, secure messaging and document exchange. This allows for faster and more complete data transfer with less overall maintenance and better communication between all parties.”

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Will Every LOS Be Ready For TRID?

Will every LOS be able to hit the August 1st deadline for the new RESPA-TILA disclosures? Probably not, but the rule will separate the good systems from the bad systems, and the good systems will be ready. For example, Associated Software Consultants, Inc., (ASC) developer of the PowerLender Loan Origination System, announced that its built-in Loan Estimate and Closing Disclosure documents solution has been delivered with the latest release, and users are implementing and testing the solution ahead of August deadline. Here’s the scoop:

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The release is the culmination of a year-long effort to prepare its user for the new disclosures. Introduced by the Consumer Financial Protection Bureau (CFPB) to replace the Truth-in-Lending disclosures, the Good Faith Estimate and the HUD-1 settlement for most loans, the Loan Estimate and Closing Disclosures will be mandatory for lenders beginning August 1, 2015.

PowerLender’s solution enables lenders to dynamically generate the Loan Estimate and Closing Disclosures from within PowerLender and allows them to exploit the efficiencies the LOS offers in terms of speed and accuracy. It uses an XML map to generate the disclosures, thus eliminating the need to maintain boilerplates and readies lenders for future delivery of Uniform Closing Dataset to the GSEs. The UCD is not yet required, but most agree it will likely be required soon. It will also have them ready well ahead of the deadline, averting the possible penalties, fines or loss of business.

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“The final piece of our Loan Estimate and Disclosures solution has been delivered to our users with the latest release of PowerLender,” said John Liston, Director of PowerLender Development. “Once user acceptance testing is performed, they will be ready to generate the CFPB integrated disclosures ahead of the August 2015 deadline, and at a minimal cost.”

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You Should Fear The CFPB


John-ListonMany in the industry compare the Consumer Financial Protection Bureau (CFPB) to the boogeyman. However, that is not an altogether accurate point of comparison at all. The term boogeyman is defined as “a mythical creature in many cultures used by adults or older children to frighten bad children into good behavior. This monster has no specific appearance, and perceptions about it can vary drastically from household to household within the same community; in many cases, he has no set appearance in the mind of an adult or child, but is simply a non-specific embodiment of terror.”

The comparison doesn’t hold up because the CFPB is not a “mythical creature,” the CFPB is very real. Where the comparison does hold up is that for many in the mortgage industry today, the CFPB does represent “the embodiment of terror.” But is that an accurate way to view the CFPB? Do lenders have reason to fear the CFPB? I think it is clear that the actions of the CFPB thus far are enough to warrant fear of the CFPB and non-compliance.

Why do I say this? Back in July of 2012, the CFPB announced its first public enforcement action with an order requiring Capital One Bank (U.S.A.), N.A. to refund approximately $140 million to two million customers and pay an additional $25 million penalty. This action results from a CFPB examination that identified deceptive marketing tactics used by Capital One’s vendors to pressure or mislead consumers into paying for “add-on products” such as payment protection and credit monitoring when they activated their credit cards.

More recently, on April 9, 2014, the CFPB ordered Bank of America, N.A. and FIA Card Services, N.A. to provide an estimated $727 million in relief to consumers harmed by practices related to credit card add-on products.

Roughly 1.4 million consumers were affected by Bank of America’s deceptive marketing of their add-on products, according to the CFPB. Bank of America also illegally charged approximately 1.9 million consumer accounts for credit monitoring and credit reporting services that they were not receiving. Bank of America will pay a $20 million civil money penalty to the CFPB.

Also, in June of last year, U.S. Bancorp (USB) and a partner company were ordered to repay about $6.5 million to resolve CFPB claims that they misled military-service members who participated in an auto lending program.

The two companies “failed to properly disclose costs associated with repaying auto loans” made to service members under U.S. Bancorp’s Military Installment Loans and Educational Services program, said CFPB Director Richard Cordray.

It doesn’t end there. The CFPB fined Walpole, Mass.-based Mortgage Master $425,000 after its examiners discovered significant data errors in its 2011 HMDA report. The errors involved 21,000 loan applications processed in 2011. The Massachusetts Division of Banks also reviewed Mortgage Master’s HMDA reporting and found significant errors.

So, when lenders compare the boogeyman to the CFPB, the comparison might not be 100% correct, but the past actions of the CFPB to penalize lenders for non-compliance to the point where the agency was investigating one lender for over a year, is a real cause for concern. Lenders don’t want to get caught in the crosshairs of the CFPB.

Today many lenders are scrambling as they try to come up with a strategy to comply with the new integrated disclosure rule set to go into effect in August of next year. This new rules changes mainstay mortgage documents in a very dramatic way and will represent a huge departure from what most mortgage lenders consider to be business as usual today.

If we go back in time a bit, the CFPB began a lengthy “Know Before You Owe” initiative to gather industry and consumer feedback. In the end, a 1,100-page Preliminary Rule was published in July 2012. Our efforts in developing a solution for our PowerLender LOS began to focus on finding the best way to ensure compliance for our lender clients. In November 2013 a 1,888-page Final Rule was issued. In a nutshell, the CFPB is now requiring lenders to implement the Loan Estimate and Closing Disclosure documents by August 1, 2015.

What does that mean exactly? The Loan Estimate replaces the Good Faith Estimate and the initial Truth-In-Lending disclosure, and the Closing Disclosure replaces the HUD Settlement Statement and the final Truth-In-Lending disclosure. The data requirements have not changed greatly, but the presentation has changed dramatically.

We determined very early on that the Loan Estimate and Closing Disclosure differ from the documents they replace because there is not a single version of the pre-printed document boilerplate. Instead, there are literally thousands of variations of what is normally considered to be pre-printed information. The integrated disclosures “boilerplates” have over 2,000 variations due to loan properties. These include purchase/refinance, fixed/ARM, 1-4 projected payments columns, payment frequency, signatures, etc.

In lay terms, this means that the traditional doc prep approach that relies on boilerplate forms won’t be able to comply. It’s that simple. To prepare these documents correctly, we believe that every loan origination system (LOS) that hopes to be in business after August 2015 has to formulate a strategy to create these documents dynamically. In our case, PowerLender LOS users will update PowerLender setup with a MISMO version 3.3 XML map that expresses the data, which will complete any of the document variations dynamically.

It’s important that LOS vendors, not doc preps, use MISMO version 3.3 because on March 11, 2014, Fannie Mae and Freddie Mac, under the direction of the Federal Housing Finance Agency released a new Uniform Closing Dataset (UCD) specification. The UCD is a new dataset to support the CFPB Closing Disclosure document. The UCD data set is a strict subset of the MISMO v3.3 data set, which expresses the data required to complete the Closing Disclosure.

So, because the GSEs intend, at some future time, to begin to collect the Uniform Closing Dataset data, and because that data set is useful in producing both the Loan Estimate and Closing Disclosure, we have decided that PowerLender will use the UCD data set to prepare the Loan Estimate and Closing Disclosure documents. In so doing, PowerLender users will already be ready to produce the UCD when the time comes.

All of this may seem very technical, but in the end it boils down to dollars and cents. For U.S. Deputy Attorney General Paul McNulty put it this way when he said, “If you think compliance is expensive — try non-compliance.”

Many LOS vendors invested a lot of money in the January QM changes. Several see these changes coming down the pike next year as a doc prep issue. That’s the wrong attitude. A proactive LOS will have the wherewithal to make sure that its lenders are compliant without solely relying on an outside vendor for support.

How do you do that? The proactive LOS that wants to not only prepare its lenders for these new rules, but also wants to ensure that their lenders are prepared for future change will deliver a dynamic document engine that uses the latest MISMO standards. There is no easy way around this for the LOS vendor that is truly committed to mortgage lending. There is no band-aid that can be placed on top of an old wound or in many cases an old LOS, which will magically make that wound heal and ensure ironclad compliance for lenders come August of next year.

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Implementing Ironclad CFPF Compliance

Next year will be a big year for the mortgage industry. With the new CFPB RESPA-TILA Integrated Disclosures Rule set to hit in August, many will be scrambing to maintain compliance. However, while some continue to craft their compliance approach, one LOS is atually already implementing to its lender clients right now. Here’s the scoop:

Associated Software Consultants, Inc., (ASC) developer of the PowerLender Loan Origination System has begun the implementation process of their Loan Estimate and Closing Disclosure documents solution for PowerLender users. Introduced by the Consumer Financial Protection Bureau (CFPB) to replace the Truth-in-Lending disclosures, the Good Faith Estimate and the HUD-1 settlement for most loans, the Loan Estimate and Closing Disclosures will be mandatory for lenders beginning August 1, 2015.

PowerLender’s solution allows lenders to dynamically generate the Loan Estimate and Closing Disclosures from within PowerLender rather than employing a document preparation service. Current PowerLender users have begun undergoing evaluations of their systems readying them for delivery, testing and acceptance of PowerLender Release 3.2, due for delivery in November. In addition, ASC has created a Setting up the CFPB Integrated Disclosures manual to help outline these necessary steps for implementation.

Due to the complexity of the new disclosures, lenders are faced with the possibility of maintaining thousands boilerplate documents in order to comply. However, PowerLender’s dynamic document solution saves users the expense and the workload associated with the few third-party solutions now being offered.

PowerLender’s use of an XML map to generate the disclosures eliminates the need to maintain boilerplates and readies lenders for future delivery of Uniform Closing Dataset to the GSEs. The UCD is not yet required, but most agree it will likely be one soon.

“We began preparing for the integrated disclosure transition when rule was first published in 2012,” said John Liston, Director of PowerLender Development, “that our solution is one of the first to market wasn’t our goal, it was allowing clients to plan early and use their own resources to accomplish the work, so they can be ready to use the CFPB integrated disclosures ahead of the August 2015 deadline at a minimal cost. And by providing a solution to a future requirement such as the UCD delivery, it adds tremendous value for our clients.”

This Is How You Comply With The CFPB

As you all know, I am invited to see a lot of technology. I will never rate technology because I don’t think it’s fair to rate one technology over others without seeing all the technology available on the market, which is impossible. However, when I see something innovative, I’m going to tell you about it. I saw how one LOS is tackling the CFPB disclosure changes set to hit our industry in August of next year and they have gotten it right. Here’s what I saw:

Everyone is up in arms about the new disclosures set to go into effect next year. I’ve talked to three different LOS players and they tell me that this change is up to the doc preps to handle. So, when the folks at LOS Power Lender, distributed by ASC, invited me to see how they are dealing with the changes, I was a bit shocked. Power Lender executives told me that it was their job as the LOS to make compliance real for their clients. In December of 2012 the preliminary regulation was released by the CFPB and these guys started working. They noticed over 2,000 variations in the final document to account for.

So, what did they do? They decided that they could no longer “fix” boiler point docs that come from various doc preps or use standard line and coordinate methods to match fields and documents.

As a side note, the owners of Power Lender have always been very involved in the MISMO standard because they feel very strongly about preparing their clients for the future of mortgage lending instead of being reactive to constant regulatory change. So, as a result, the company created a proprietary dynamic document engine. What does that mean you might ask? The lender selects the document that they want from within the Power Lender LOS and the LOS automatically gathers the data, pulls it into their dynamic document engine and a fully compliant document is created just like that.

It’s important to note that in developing this technology, Power Lender executives decided to use MISMO Version 3.3 standards. That’s important for two reasons: First, unlike some doc preps that I have talked to, Power Lender has chosen to embrace the latest and greatest that MISMO has to offer so their clients are not going to be saddled with an older version of the standard that is cheaper for vendors to comply with, but does not prepare lenders for the future. Second, Power Lender also made this decision because they wanted to be in line with the Fannie Mae Uniform Closing Dataset, which requires the use of MISMO Version 3.3. Fannie Mae is not mandating this yet, but with the e-closing pilot going on at the CFPB in particular, one has to imagine that a mandate may come at some point in the future. When that mandate does come all of the doc prep and LOS vendors will be forced to embrace the latest version of MISMO, but Power Lender clients will already be there.

And the kicker is that when doc preps and LOS vendors alike say that they will have their solution to deal with this new CFPB regulation ready by the end of this year or early next year, Power Lender showed me this solution and it’s working now. It will be out to its lenders by September.  The fact that an LOS, not a doc prep, is taking on this responsibility and they’re doing it in such an innovative way such that they are, as much as possible, future-proofing their clients from the issues that may be associated with future rules, mandates, etc., is really commendable and worthy of praise.

You can find out more about Power Lender online HERE.

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Make The Shift

You Can Download This Article As A PDF HERE

DawnMarieDayToday’s lending environment puts intense pressure on community banks. There has been a significant influx of new rules and regulations, CFPB requirements, enforcement and the potential for costly penalties and fines for non-compliance. In addition, the market is experiencing fluctuating rates, origination volumes that are declining, refi’s that have diminished and a shift to the purchase market is in full force. These current conditions provide a daunting task for community banks as they look to navigate these challenging mortgage market conditions.

Compliance poses probably the biggest challenge to community banks. In testimony to the House Subcommittee on Financial Institutions, William B. Grant, Chair of the American Bankers Association Community Bankers Council told members that a conservative estimate of the cost of compliance to community bankers was approaching 12% of operating costs, and that was in 2012. With that big of an impact on the bottom line, it is imperative that community banks partner with knowledgeable service providers for help to keep them ahead of the compliance curve without incurring fines or paying extravagant legal fees.

Add in a highly volatile market where origination volumes are declining and margins are tight, that makes it challenging to sustain profitability. In spite of the predicted lower origination volumes, all is not doom and gloom for community banks and their lending departments in 2014. Due to the nature of the relationship that community banks have with prospective borrowers in their community, they are in the perfect position to capitalize on the shift from refis to the purchase market.

In our case, Chelsea Groton Bank is an independent, mutually owned, community bank serving Eastern Connecticut. We are deeply committed to delivering on our promise of providing the highest level of customer service to our clients and to the community. In part, that meant lowering lending costs, speeding delivery and offering timely loan products that are both borrower and market friendly. To be able to deliver on that promise and to effectively respond to today’s market conditions, we outlined a plan to achieve our goals.

The first step was to develop a strategic partnership with a technology provider who could help us successfully navigate the shifting market challenges that included an increasing compliance requirement and a shift in origination demand. The second step was to employ technology solutions that provide flexibility to proactively adapt to changing markets while promoting efficiencies and improving customer service levels.

So what does the right strategic partner look like? For Chelsea Groton, first and foremost, the right strategic partner had to offer a level of commitment well beyond the vendor offering mere software and help-desk services. The right strategic partner had to deliver a flexible, refinable lending platform for all types of loans, proactive compliance solutions and an exceptional commitment to support and service.

For a community bank, having one common platform for consumer, residential and small-business lending can deliver a tremendous competitive advantage. This alone significantly increases efficiencies throughout the entire enterprise. One platform eliminates the need to switch between systems and saves time and increases quality by eliminating the need for redundant data entry. The need to train and maintain multiple lending systems is gone and cross promotion of loan products is simplified. This allows for key bank resources to spend less time preparing loans and more time increasing the customer service levels that their customers have come to expect.

Compliance is now a business imperative for all lenders. Community banks understand that they need a proactive, responsive, and most importantly, a collaborative compliance approach and often look to their strategic partners for help. The strategic partner should provide extensive lending and compliance expertise that closely monitors all regulatory actions, including the GSEs. Having a partner that has extensive insight and on-going relationships with the GSEs along with a proven history of delivering fully tested and advanced solutions prior to regulatory deadlines provides risk mitigation for the community bank.

The ability to easily customize and make changes in the lending platform is critical for today’s community banks. It is necessary that their technology provide the ability to rapidly respond to constantly changing market conditions. Capabilities such as customized workflow, the use of data-quality checks, and creating special loan products ahead of market changes result in loans delivered more quickly for less money. Enough cannot be said about how the endless possibilities offered in a flexible lending platform helps increase the level of customer service that can be delivered.

For community banks to truly deliver the support and service that their customers demand they, in turn, must have a strategic partner that not only delivers a high level of support, but they must have an understand as to what community banks need to thrive in today’s market. Their knowledge of your operation, your requirements and the business world around them is vital to a successful relationship. The strategic partner has to have a skilled, highly trained and experienced staff of professionals who are there to help every step of the way and are available at any time.

While there are many challenges in today’s lending environment there are also significant opportunities for community banks such as ours as the market shifts from refinances to the purchase market. To be able to do that is takes a strategic partner that shares the same belief and commitment to serving the needs of its clients.

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Success Stories Matter

*Success Stories Matter*
**By Tony Garritano**

TonyG***A lot of times we get caught up talking about the latest trend. In the end some trends stick and others disappear. But what is lasting is success. When a lender succeeds by using technology they don’t go back. In this case, Associated Software Consultants, Inc., developer of the PowerLender Loan Origination System, one of the industry’s few single platforms for mortgage and consumer lending, announced a client success story from Country Bank. Here’s what happened:

****Basic necessity drove Country Bank to begin a search for a new LOS. “Factors for the search included the lack of functionality of our existing system, and a desire to have more control over the lending process,” stated Denise Walker, Director of Retail Lending at Country Bank. “We also wanted to increase the efficiencies of the LOS so that we could do more with less and do it more effectively. After extensive due diligence, we selected and successfully implemented ASC’s PowerLender.”

****She went on to state, “We are extremely pleased with the fact that PowerLender is flexible and user-definable. The ability to refine the system to our needs has provided us with a great deal of control over our operations as well as making us more efficient. An additional benefit is PowerLender’s ability to process mortgage and consumer loans from the same lending platform. Being able to process consumer loans from the same system as our mortgage has saved us a significant amount of time and eliminated the extra expense of managing multiple systems.”

****Dave Stricklen, director of sales at ASC, added, “Many LOSs announce new clients, but you never hear if the lender was successful in implementing and using the system in a production environment. We could not be more pleased that Country Bank can positively affirm both.”

****Walker concluded, “All in all, we are reaping the benefits of PowerLender as a customizable loan platform that has allowed us to become more efficient, and has given us a great deal of control over our lending operation.”

Magazine Feature: Community Banks Are In The Hunt

In today’s highly regulatory lending environment, lenders are seeking LOS solutions that can quickly, easily and effectively respond to constantly changing rules and regulations. This changing regulatory environment has forced many lenders to reevaluate their LOS.

According to QuestSoft’s seventh annual compliance survey, “18.6 percent of mortgage lenders are reevaluating their current loan origination software (LOS) platform. QuestSoft, a provider of mortgage compliance software, has tracked the number of lenders seeking an LOS change since 2007. The percentage of lenders considering an LOS change hovered around ten percent until 2011 when the percentage spiked to 17.75 percent and continued to climb to 18.7 percent in 2012”.

Compliance is now a business imperative for lenders of all sizes. This presents specific challenges for community banks as they look to remain compliant and competitive. Community Bank executives are quickly realizing that off-the-shelf systems don’t respond quickly enough to the constantly changing rules and regulations. They are also learning that they simply do not have the IT resources necessary to run and support enterprise LOSs, let alone the cost and time it takes to implement such systems.

So what are the “Top 7” requirements community banks are looking for in a new LOS solution?

<1> Comprehensive Compliance

<2> Ability to Handle Multiple Loan Types

<3> Hosted- On Demand Solution

<4> Ability to Easily Configure Solution

<5> In-depth Integration

<6> Successful Community Banking Implementations

<7> Responsive Customer Support Specific to Community Banks

Now let’s talk a bit more about these seven points for a minute:

Comprehensive Compliance

Community Banks appreciate the importance of compliance and its potential impact on their businesses; therefore they are looking for an LOS that understands today’s compliance issues as it relates to their businesses. Specifically, they require an LOS provider with extensive lending and compliance expertise that closely monitors all regulatory actions, including the GSEs. Having in-depth knowledge and working relationships with the GSEs allows the provider to deliver fully tested and approved solutions to clients well in advance of any announced deadline. This allows community banks time to test and implement the regulatory changes in a timely manner, significantly reducing stress while mitigating risk.

In addition to having strong internal compliance from the LOS provider, it is also important for the LOS provider to have established integrations with leading compliance solutions such as QuestSoft, ComplianceEase and forms providers such as Wolters-Kluwer, Harland and doc prep providers MRG, Guardian Mortgage Forms, and DocMagic to deliver solutions that stay ahead of the ever-changing compliance curve.

Ability to Handle Multiple Loan Types

Another requirement that community banks are looking for in a new LOS is a lending solution that can handle consumer, commercial and mortgage loans. Many of the systems on the market today only handle mortgages that require community banks to purchase, support, and train and maintain multiple systems. Not only is that much more difficult in today’s constantly changing regulatory environment but it is also costly and inefficient. Most community banks simply do not have the required resources to maintain multiple lending systems.

Hosted On-Demand Solution

Besides handling multiple lending systems, executives need to be concerned with the upfront and ongoing costs associated with implementing loan origination software. Hosted solutions, operate as a Software as a Service (SaaS), enable lenders to deliver loan origination software “on-demand” – without the cost of deploying expensive technology infrastructure. A hosted solution alleviates the community banks investment and costs related to maintaining the LOS, hardware, operating systems and network operations.

Hosted advantages include:

>> Lower Initial Costs – The Lender avoids a large, upfront software license fee.

>> Lower Infrastructure Costs – The community bank need not host software or data files on their hardware so investing in additional hardware (servers, routers), newer operating systems, database licenses (i.e. MS-SQL) and upgrades are no longer required. There is also the convenience of no longer needing to constantly backup data because storage is the responsibility of the hosted provider.

>> Fewer Personnel – The hosted solution reduces the need for specially trained personnel to handle maintenance, monitoring and software updates and configuration changes. The hosted provider will provide a dedicated team to handle these tasks.

>> Secure Database Technology – The Hosted services should be certified, reliable and secure, having received SSAE 16 SOC2 certification using industry leading security vendors that offer the most comprehensive and most advanced security available.

>> Reduced Downtime – Hosted solutions can reduces reliance on your IT personnel to support the system.

>> Strategic Compliance Partners – Your hosted solution should work with the best compliance resources available to provide you with multiple options to meet your compliance requirements.

Ability to Easily Configure Solution

Configurability is vital to the effectiveness of your LOS. That’s why lenders should employ an LOS that uses flexible “business rules” to provide LOS configuration. The business rules should be easy to understand and help configure every phase of the lending process. With easy-to-use configuration, lenders can tailor specific business rules and practices to streamline processes, create efficiencies and manage risk. Best of all, these business rules can be modified as your requirements change. Configuration moves lenders from reactive maintenance into proactive business growth, through years of expansion and change.

In-depth Integration

The community bank’s ability to exchange customer data with the core banking system or borrower loan-level information to other third-party providers is vital. The LOS provider should not only have a proven track record of success integrating with other service providers but also possess the ability to quickly and cost-effectively integrate with new provider as lending needs change. Whether it be for ordering credit, flood or mortgage insurance, for obtaining an instant decision from popular Automated Underwriting Systems such as Loan Prospector or Desktop Underwriter, for submitting HMDA data, for receiving borrower 1003 application data from popular web-based POS systems such as Data-Vision’s LoanQuoter or for transmitting closed loan data to servicing systems.

An LOS provider’s database design and built-in export/import features must provide the ability for community banks to exchange customer/borrower information between the LOS and other systems easily and effectively.

Successful Community Banking Implementations

Vendors can promise a good game when it comes to their ability to sell an LOS to community banks, but the proof is in a proven track record of actually delivering on the promise to community banks. The LOS provider should be able to provide an extensive list of successful implementations. Not just new sales but more importantly, community banks that are successfully up and running on the proposed solution.

When talking to other community banks, ask if the solution is actually in production? Does the LOS handle more than just mortgages? Can they produce consumer, commercial and mortgage loans? How timely has the provider delivered compliance changes? Is it a hosted solution and has in minimized your IT footprint? Is the system easy to configure so that you can quickly respond to market changes? Does the proposed solution actually integrate with your third-party service providers? Is that reference actually using the integration?

The community banks that you speak to should be able to confidently answer these questions in the affirmative if that provider has actually delivered on their promises to other community banks.

Responsive Customer Support

In today’s fast-paced and constantly changing lending environment responsive customer support from any service providers is extremely important. To provide the needed level of support and responsiveness, your LOS provider must truly understand the specific needs and challenges of community banks and have a longstanding reputation with the community bank market. Having extensive experience working with community banks allows the provider to deliver best practices and key insights. Working directly with community banks on a daily basis throughout the years allows the service provider to be responsive and deliver a level of support and service that other LOSs simply cannot match.

At the end of the day, one size does not fit all when it comes to LOSs for community banks. Off-the-shelf systems with limited no or flexibility clearly don’t work and neither do enterprise-wide systems that cost too much and take too long to implement. The key is finding the right LOS that has specific community bank experience. Follow the Top 7 Requirements to ensure your success when selecting a new LOS for your community bank.