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The Cost Of Real-Time Compliance

At a recent regulatory technology conference, RegTech Enable, two telling statistics revealed the mounting cost for financial lending institutions to maintain and respond to government compliance United States Bank paid out $150 bullion in fines, settlements and penalties since 2008, and financial institutions spent $70 billion on regulatory compliance, American Bankers Association reported that 84% of banks needed to hire more staff to manage the growing influx of information and changes.

Thomson Reuters Regulatory Intelligence monitors more than 950 regulatory rulebooks worldwide published by more than 550 regulatory bodies. In 2015, it reported that daily updates for the financial industry increased by 127% from just 68 per business day in 2012 to 155 in 2014. That adds up to a total of 40,603 in 2014 alone – more than double from the previous year. These updates are not restricted to legislation and published regulations – there are numerous sources from which to gather information on what is going to actually regulate a particular lender, including rulebooks, policy papers, speeches, and enforcement actions.

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The Information Pipeline

Approximately 70 individual regulatory entities sit at the center of lending compliance. The process of sifting through their many updates and requirements is layered, starting at the top with nationwide regulations on lenders produced by agencies such as the Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC), to name a few.

At the state level, regulations depend on the type of loan or specialized loan product. If a given lender wants to make a loan in Ohio for example, it needs to know which regulations apply to that loan type in that state. If the loan is sold, there is an additional layer of requirements imposed by the investor entity that must be considered.

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Investor organizations, including Fannie Mae and Freddie Mac, operate by a set of corresponding guidelines called “investor requirements,” which, alone, are thousands of pages worth of compliance requirements. That is thousands of pages of compliance requirements for a single mortgage loan in addition to implementing state-specific and federal lending regulations, reviewing enforcement actions regarding compliance, and knowing the subjectivity of regulation interpretations.

Lenders conducting business in multiple states must maintain the capacity to address that entire regulatory environment, because it determines the structure of the loan, documents, required disclosures, and eventually calculations for the interest rate, APR, and payment amounts.

There are varying degrees for how a regulator might regulate a particular mortgage lender.

Enforcement actions, for example, may not be consistent nor follow standard administrative procedures, but do indirectly regulate mortgage loans and therefore must be monitored and considered as well.

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Comprehensively, the environment for making a single family mortgage loan is a complex spider web of regulation.

It Takes A Village

Within a financial lending institution, compliance management should begin with the chief executive officer who tasks the chief compliance officer or perhaps an internal auditor with regulation implementation within the business practices. With the emerging RegTech sector, there are a number of technology solutions to help manage compliance from loan document preparation to mortgage portfolio analysis. But who is keeping up with the ever-changing rules of compliance? One day you are in compliance, and the next day you could be out.

Document preparation companies should be maximizing their collective compliance knowledge, building specialized teams stacked with individuals who have decades-worth of experience and are dedicated to overseeing and implementing the many changes mandated by regulatory agencies. To keep up with the quick pace of changes in today’s complex environment and properly implement compliance in real-time, teams must engage a range of experiences and skillsets, from attorneys and compliance experts to programmers and IT experts.

But it is not enough to simply monitor the updates; they must be interpreted, evaluated, integrated, and disseminated.

For example, if the CFPB issues a new regulatory interpretation about how lending disclosures are to be made on a particular type of loan, specialists must learn of that regulation and review it with their lawyers. If the lawyers determine that the regulation changes the status quo, they must identify which lenders and loans it affects and the impact it will have. This change could potentially disrupt the lending process of a single loan or multiple loans – requiring adjustments in documentation, marketing areas, and business practices – across the entire lending business. Once the lawyers determine what the change means and who is affected, there are three paths the information can take.

The first is directly within a loan operation and document preparation platform, which might require minor quantitative adjustments to calculations or data organization. If the change affects the financial institution’s operations, such as how loans are marketed or disclosed, the institution must address it directly. If the regulatory interpretation has a broader impact on a certain loan type or loan area, a more comprehensive analysis of how the change will affect the business at large needs to be conducted.

Managing Compliance In Real-Time

Keeping current is half the battle of any lender, but mortgage executives also shoulder the other half: forecasting.

Regulatory updates released daily are by-products of greater powers at play, trickling down from decisions made by the individuals in charge of each regulatory agency. The Director of the CFPB or the Chairman of the House or Senate Financial Services Committees are dictating the changes, directly impacting that particular agency and the regulations it issues or the legislation the committees may introduce.

To ease the burden and free up more resources for monitoring what is coming down the road, or simply because there is a lack of bandwidth, organizations can rely upon their document preparation company to manage the present day concerns.

It sounds understated to say that this is a major responsibility. Lenders are not only trusting document preparation companies to stay current on all the changes, but also to interpret them, incorporate them into the document packages, and make sure there are no conflicts or inconsistencies across the layers of compliance.

Dedicated teams with many years of collective experience are best suited for the challenge of managing compliance in real-time because they have the bandwidth and depth of knowledge to respond swiftly, accurately, and reputably. The greatest responsibility of a document preparation company is to ensure that regulations are understood and adjusted on a timely basis – whether immediate or taking effect on a specific date – so that documents always remain compliant.

For mortgage executives, that is one less thing to worry about.

About The Author

Michael L. Riddle

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.

Acquisition Furthers Automated Data Verification

QuestSoft, a provider of automated mortgage compliance software, has purchased Laguna Hills, Calif.-based IMARC, a leader in data verification and audit services to the financial services industry. The acquisition adds IMARC’s services to QuestSoft’s new Verification and Audit Services division, “QuestSoft Verifications.”

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The acquisition enables QuestSoft customers to easily conduct loan audits, as QuestSoft Verifications will now offer all of IMARC’s verification and audit services to QuestSoft’s existing 4506-T and SSA-89 capabilities. This new division brings Verification of Employment (VOE), Verification of Income (VOI), Asset and Occupancy Verifications as well as full loan audits to QuestSoft customers, eliminating the need to use time-intensive manual orders to verify all information needed to ensure loan compliance.

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“Combining IMARC’s verification and audit services with QuestSoft’s compliance software gives lenders a one-stop shop for all of their compliance needs,” said Leonard Ryan, founder and president of QuestSoft. “IMARC also brings with it a strong tradition of outstanding customer service and a dedication to providing high quality services quickly and efficiently, blending well with the QuestSoft commitment to our customers.”

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All IMARC employees transferred to QuestSoft’s corporate headquarters in Laguna Hills, California. Bob Simpson, founder of IMARC, is now serving as QuestSoft’s senior vice president and director of the Verifications Division.

“High quality products, ease of use and outstanding service are the three pillars that build strong relationships between vendors and lenders,” Simpson said. “By combining our services with QuestSoft, we have created the best resource for lenders to handle all of their mortgage compliance, verification and audit needs.”

About The Author

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

To Solve Compliance Complexity, Look To Einstein’s Principles

In 1915, Albert Einstein proposed the general theory of relativity, where he explains gravity as a consequence, rather than a force. Anything of mass, he theorizes, has an equivalent amount of energy. And, the greater the mass, the greater the energy. E=MC2. And like Einstein’s mass-energy equation, compliance is the consequence of regulation.

Nearly twenty years later in 1934, The New Deal emerged along with the Federal Housing Administration, the 30-year mortgage loan, and a number of regulations to fuel America’s economic recovery, protect consumers, and increase home ownership among middle income brackets. The mass of the regulatory system was relatively small then, and the force necessary to counteract regulation only needed a relatively small amount of energy.

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Mortgage document preparation was a simple process thirty-plus years ago. Within 48 hours, you prepped 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.

In the same span of time that witnessed the typewriter’s evolution into a smartphone built for efficiency, the regulatory system grew more complex in equal opposition.

For every regulator action, there is an equal and opposite compliance solution.

The regulatory system of today is an expansive and complex environment embodied by a number of housing, finance, and regulation bureaus that dictate compliance for nearly every aspect of a loan. The mortgage industry alone supports an incredible variety of loan products and an immense amount of data, and a single document package can require nearly 60 compliance state and federal compliance checks.

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Take one mortgage document set and multiply it across the total number of mortgages produced in one state, and then again over several – or all 50 – states’ regulatory policies. The result? A very expensive mortgage origination process. It should come as no surprise that by the end of 2016, production costs per originated mortgage was at an all time high.

It’s no question that a lender’s focus to maintain a profitable origination business can be slowed by the ever-changing and ever-growing regulatory landscape. As the pressure on the industry mounts, so does the need for an equal and opposing force to effectively – and profitably – navigate it.

The financial tech (FinTech) and regulatory tech (RegTech) sectors have risen to the occasion by building Software as a Solution (SaaS) products. Over the past decade, the industry has accumulated a number of analytics tools and services while compliance-related tasks are still primarily performed across a wide staff. But, an increase in the number of tools and people to learn, implement, oversee, and manage those tools can be tricky. Banking is still people doing a job, and mistakes are a natural result.

Technology alone is not a perfect solution, either. For all the ease and accuracy technology can provide, the rate at which technology solutions are rendered outdated is exhausting. Many best-in-class tools struggle to adapt fast enough in the ever-evolving regulatory landscape when maintained by companies with a primary expertise in software and not compliance.

The exposure of a lender is twofold: out-of-date software exposes potential security risks and out-of-date regulatory systems expose potential compliance risks. Both can result in millions of dollars of recovery costs.

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For the documents space, this has taken the form of document prep programs that produce generic legal packages attuned to state regulations, but are not customized to a specific product or to a unique variability that may have specific state regulations. While there are many one-size-fits-all solutions, this can lead to challenges when it comes to maintaining compliance.

An Ecosystem of Mortgage Compliance. E=MC2.

The DIY solution to maintaining compliance would take any institution thousands of hours of research and manpower to implement policies that adhere to federal and state regulations, not including the technical know how to build a platform to manage it.

While the complexity facing the industry appears daunting, the answer exists at the intersection of regulatory, legal expertise and technical mastery: a holistic and advanced ecosystem of mortgage compliance (E=MC2). The true best-in-class solutions crossbreed software engineers with experts steeped in regulatory compliance knowledge. The result is a holistic compliance management systems (CMS) maintained on both fronts.

Effective compliance management ecosystems can and have served the financial services industry for the better, guiding institutions safely through any potential risk. Bonus: CMSs are supported – and even encouraged – by the federal government.

A well-run, wide range, and comprehensive system that includes policy, procedures, testing, controls, automation, and risk assessment lead to examiners reviewing banks more favorably. The Consumer FInancial Protection Bureau (CFPB) has been direct in saying that the more comprehensive a CMS, the more they will believe in a bank.

While still relatively new, there are integrated tech solutions built on the backbone of legal, financial, and regulatory ecosystems that produce compliant document packages on one end and proactively manage redlining and fair lending risk on the other. Compliance technology can minimize errors, automate processes, save time and resources.

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

And while the industry might immediately view CMS a proactive and offensive approach, 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 an incredibly pioneering environment in which to manage regulatory changes and deadlines.

These expertise-fueled compliance ecosystems can empower financial institutions to react to the ever-growing regulatory mass with equal force. The weight of the regulatory system is counteracted by the power of integrated compliance tech solutions. And by alleviating the burden of regulation, banks can focus on profitability knowing it is no longer a weight they need to carry alone.

About The Author

Michael L. Riddle

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.

Loan Document Automation

The mortgage lending industry presents a number of unique challenges for classifying and extracting data from key documents, due in part to the large volumes of disparate documents in most loan files.

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New documents and the regulations related to them put a new emphasis on the need for quick and very accurate data. Lenders in particular face significant penalties for inaccurate data and missed delivery deadlines. Sorting and capturing critical data from thousands of diverse documents has historically been labor intensive, slow, and expensive. To stay competitive, and meet these new and constantly changing challenges, automation through technology is no longer optional.

The key is finding a provider that specializes in automated document classification and data capture specifically for mortgage lending and the financial services industries, which scales to process millions of pages per day.

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Leading edge OCR solutions offer significant efficiencies for classifying large quantities of differing document types and extracting key data elements from those documents.  In the mortgage market, these capabilities allow for quick and accurate identification of over 500 unique documents in the typical mortgage file, along with the ability to capture nearly any data element from those documents that an organization requires.

Here are some examples of applying this advanced technology to specific mortgage documents:

Application Processing

Extract relevant content from borrower-provided pay stubs, W-2s, bank statements, and tax documents to expedite underwriting and reduce origination costs.

Post-Close Processing

Identification of each document in the loan file, bringing structure to what was a 300+ page blob of content.

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Verification that relevant documents have been signed

Compare key data elements from loan file with your systems of record to verify changes haven’t been made without your knowledge.

UCD File Generation

Create the Uniform Closing Dataset (“UCD”) file required (as of Sept 25, 2017) when selling loans to Fannie Mae and Freddie Mac

Reporting And Audit Automation

Extract key loan file data elements to support the following reporting/audit activities:

HMDA reporting – our system is ready to capture the additional demographic data on the new Uniform Residential Loan Application (effective Jan 1, 2018)

RESPA audit

TRID audit

Lenders can longer afford to manually classify and manage large volumes of disparate documents. Manually preparing a batch for scanning by inserting document separator sheets and manually classifying loan documents is a labor-intensive, inefficient and error prone process. Not only is it critical that this process be done accurately, but also that it be done efficiently in order to allow downstream underwriting and servicing decisions to be performed in a timely way.

At the end of the day it is about finding a provider that focuses its skills towards delivering the most efficient, accurate, and flexible freeform document classification and data extraction solution available. The time is now for lenders to reduces manual labor costs and increases accuracy levels associated with classifying and capturing data from loan documents.

About The Author

Mark Tinkham

Mark Tinkham is Director of Business Alliances at Paradatec, Inc. Over the past twenty-five plus years, Mark has worked for technology companies that deliver innovative solutions to the financial services industry. For the past ten years, his primary focus has been bringing efficiencies to the mortgage market through industry leading Optical Character Recognition (OCR).

TRID 2.0: Now What?

Over a year in the making, TRID 2.0 was finally released on July 7, 2017. With an effective date 60 days after the final rule is published in the Federal Register, and a mandatory compliance deadline of October 1, 2018, the industry is sure to have a lot to say about these new regulations.

TRID 2.0 is meant to provide additional clarity to the original TRID rule that went into effect on October 3, 2015. Changes include:

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Cooperative Housing. Loans on cooperative housing are now covered by TRID, having previously been left to state law definitions of real and personal property.

Tolerances. New tolerances have been added and others have been clarified, including total of payments, the “no tolerance” category and good faith, and property taxes.

Rate Locks. A new Loan Estimate, or Closing Disclosure, must be provided upon rate lock, even if nothing has otherwise changed.

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Escrow. The Closing Disclosure Escrow Account Disclosures have been clarified, allowing for 12 months in “Year 1” calculations.

Additional Guidance. The amendment provides additional guidance around disclosure of construction to permanent loans, simultaneous second loans, disclosure of principle reductions, and a reiteration that re-disclosure of the Loan Estimate (LE) or Closing Disclosure (CD) is permitted at any time.

What’s Missing?

The CFPB has not yet finalized proposed changes to resolve the infamous “black hole” issue; instead, they published a new proposal. In case you’re unfamiliar, complications arise due to potential timing conflicts between the Loan Estimate and the Closing Disclosure. If a borrower experiences a change in circumstance after they have received the Closing Disclosure and needs to delay the date of closing, there are concerns that a lender will be unable to comply with both the requirements to provide a revised disclosure to the consumer within 3 business days of the change and simultaneously within 4 business days of consummation in order to reset the tolerance thresholds for the good faith determination. There is even uncertainty of the ability of a re-disclosed Closing Disclosure to reset tolerances at all. Can we expect a final TRID 3.0 to resolve the issue? Only time will tell.

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Similarly, the issue of disclosure of simultaneous title quotes for owner’s and lender’s title premiums remains unchanged and unaddressed. The current, and very complicated, method of calculating lender’s title in the case of a simultaneous quote still stands and is not currently included in the “black hole” proposal.

What Happens Next?

Our main concern after dissecting TRID 2.0 is the phased implementation. On the surface this sounds like a great thing for lenders, but what happens when a consumer compares disclosures between lenders? This gets tricky when it comes to the application date. Additionally, you don’t want to change to the new calculations in the Calculating Cash to Close table mid-loan cycle with your consumers. This would result in re-disclosed Loan Estimates, or the Loan Estimate and Closing Disclosure on a single loan may utilizing different logic. This could confuse consumers as well as investors on loan purchase, and examiners down the line.

Regardless of the outcomes our industry will adjust. One thing is for sure, policies, procedures, and technology will continue to play an essential role in mortgage compliance.

About The Author

Amanda Phillips

Amanda Phillips is EVP Legal and Regulatory Compliance for Mortgage Cadence, an Accenture Company. She works closely with Mortgage Cadence Product and Development teams to help interpret compliance requirements and assist in developing risk mitigation strategies and implementing the requisite controls within the Mortgage Cadence platforms. She also communicates with clients regarding Mortgage Cadence compliance interpretations and controls. Phillips joined Mortgage Cadence in January 2014 as its Legal and Compliance Lead, guiding development of the organization’s technologies, including the Enterprise Lending Center, the Loan Fulfillment Center and the Document Center.

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.

About The Author

Kathleen Mantych

Kathleen Mantych is the senior marketing director for MRG Document Technologies, a provider of legal compliance and dynamic compliant document preparation software technology to lenders nationwide. With more than 26 years experience in the mortgage industry, Mantych has held executive sales, product and alliance management positions with key mortgage technology providers. Dallas-based MRG is a document preparation practice group within the law firm of Middleberg Riddle Group putting the company in the unique position of its dynamic document content being created and tested by an in-house team of compliance attorneys. MRG owns its own legal content as well as its own calculation engine and compliance tests, ensuring accuracy for its lender customers.

PathSoftware Now Integrated With ComplianceAnalyzer From ComplianceEase

PathSoftware today announced that Path, its highly-configurable, multi-channel, cloud-based mortgage loan origination software (LOS), is now integrated with ComplianceAnalyzer with TRID Monitor from ComplianceEase, a provider of automated compliance solutions to the financial services industry.

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The seamless integration lets Path users automatically audit loans for regulatory compliance violations using ComplianceAnalyzer with TRID Monitor—without ever leaving the LOS. ComplianceAnalyzer with TRID Monitor is the most comprehensive, real-time TRID auditing solution available in the market. It can check for any changes in terms and fees throughout the origination and closing processes; audit tolerance across all disclosures and changed circumstances; and track post-consummation disclosures, including those with a cure to the borrower. In addition, ComplianceAnalyzer with TRID Monitor performs audits for Federal high cost and higher-priced loan regulations, the Secure and Fair Enforcement for Mortgage Licensing Act, state high cost and anti-predatory regulations, and state license-based consumer lending laws and regulations. It can also perform audits for compliance guidelines from secondary market investors and government-sponsored enterprises.

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Path was designed to simplify and streamline mid- to enterprise-level, multi-channel loan origination. All loan data, lock data, products, pricing, automated underwriting system findings, loan estimate and closing disclosure documents emanate and are reconciled within one system. In addition, the LOS’s configurable workflows, with role-based functionality, provide visibility into every loan at every stage—so financial institutions can ensure their business rules are followed.

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“We developed ComplianceAnalyzer with TRID Monitor to deliver in seconds comprehensive loan-level compliance reports supported by detailed regulatory and cure analyses, exception tracking and reporting,” said Dan Smith, Senior Vice President of ComplianceEase. “Our integration with Path will allow us to help more lenders improve efficiency, as well as give them greater confidence in the loans they’re originating.”

“Having the ability to automatically audit loans at every step in the origination, closing and post-closing process is vital in today’s ever-changing regulatory environment,” said Doug Mitchell, Director of Sales and Support at PathSoftware. “We’re pleased to partner with ComplianceEase to help our financial institution clients improve loan quality, reduce compliance risk, and capture the data needed to prepare for regulatory exams.”

Progress In Lending

The Place For Thought Leaders And Visionaries

MRG Responds To Significant Growth By Hiring Industry Vet

Dallas-based MRG, a mortgage banking compliance organization, provides the mortgage industry a blend of compliance, unique and tailored document preparation, and technology, products, and services, is proud to announce the hiring of Chris Anderson. Anderson will be responsible for handling the increased demand for MRG’s products and services through new client acquisition and adding value to the existing client base by delivering an extensive array of best-in-class compliance solutions.

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Anderson has more than 20 years of account growth and management experience in the financial services and software industries. A former chief business development officer at Lending QB, Anderson played a significant role in expanding LendingQB’s footprint in the mortgage industry. Most recently, he served as executive vice president of sales at ISGN, a leading provider of loan servicing and default management systems for the residential and commercial lending industries. Anderson’s previous roles include executive vice president of sales and marketing at Docutech, a provider of compliant document solutions for residential lending, and general manager and business head for WIPO Gallagher, a provider of technology and business outsourcing services for the mortgage banking and lending industries.

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For more than 35 years, MRG’s highly respected staff of compliance experts has been providing lenders with legally defensible compliance expertise. Their unparalleled compliance solutions combine years of real estate law experience, in-depth compliance insights with state-of-the-art technology to document mortgage transactions. Their solutions provide industry leading built-in compliance checks to mitigate risk and alleviate compliance guesswork.

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“Given MRG’s significant growth, we needed a mortgage technology veteran who understands the constantly changing compliance landscape and the demands of today’s lenders,” said Mike Riddle, managing director of Mortgage Resources Group, LLC. “Chris has extensive experience in helping lenders respond to changing market conditions through the use of advanced technology. I am confident that Chris will apply those skills as we proactively work with our ever-growing client base.”

“The regulatory environment for today’s mortgage lender has become exceedingly complex, lenders are looking for solutions to ease their compliance burden,” said Anderson. “MRG has extensive legal expertise and best-in-class compliance solutions to meet those challenges head on.”

Progress In Lending

The Place For Thought Leaders And Visionaries

The Future Of Digital Compliance

As everyone talks about the digital mortgage, executives at the Seventh Annual ENGAGE Event held in Denver, Colo, looked to broaden the conversation. They discussed the future of regulatory compliance in mortgage lending in a digital world. Here’s how they see things:

The burning question was: Will the coming digital mortgage reshape compliance? “It already has. Pre-2007 we didn’t think about compliance until after the loan was closed,” said Keith Kemph, Managing Consultant at CC Pace. CC Pace is a boutique business and technology consulting firm which has been serving the mortgage industry for 37 years. Early in Keith’s career, he was a Retail Branch Manager and later Regional Manager with Dime Banks, North American Mortgage. He went on to serve as Director at Merrill Lynch for seven years where he implemented numerous business and technology projects for the mortgage division. The last 10 years Keith has been consulting with executive management teams of mortgage vendors and mortgage bankers nationwide on strategy, process, and technology while successfully guiding organizations through change.

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“We didn’t have to. Now, we have to think about compliance at every step of the loan process,” continued Kemph. “We just went through ten years of chaos as we stitched together technology tools, our loan process and navigated our way through relentless new compliance measures. In our recent survey we found that lenders have formally transitioned from extremely cautious to optimistic. They are less on defense and more on offense, able to focus on the customer experience. However, while lenders feel like they can finally breath, they need to remain somewhat cautious as they map out and implement their digital mortgage strategy.”

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The landscape is becoming much clearer. “The CFPB came out with things like TRID, HMDA, etc. to really set the rules,” said Leonard Ryan, Founder and President of Laguna Hills, Calif.-based QuestSoft Corporation, a provider of automated compliance review software for the mortgage industry. Since the company’s founding in 1995, Ryan continues to oversee strategic planning and the day-to-day operations for the company including business and software development, interface partners, sales and pricing. Under Ryan’s leadership, QuestSoft has received Mortgage Technology’s Top 50 Service Provider Award since 2009 and was named a Top Workplace by The Orange County Register in both 2013 and 2014 out of over 10,000 applicants.

“So, the CFPB is telling you who should get a loan and who shouldn’t. They are setting the rules. In some ways they are reducing the industry to numbers. Now lenders have to work within those rules to differentiate themselves, and that’s where technology can play a role,“ added Ryan.

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As a a result, the future of digital lending compliance will include a greater emphasis on data and bringing compliance as close to the front of the mortgage process as possible. “Digital compliance is evolving into a process that is embedded into every aspect of the mortgage loan lifecycle,” noted Michael L. Riddle, the Managing Director of Mortgage Resources Group, LLC. 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.

“Compliance will be essential. Further, compliance will be a key part of digitizing every part of the future loan process,” Riddle concluded. “Compliance will also be increasingly data driven. There will be no escaping embracing a more data-centric approach to mortgage lending.”

About The Author

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Parsing The Data

While STRATMOR has always been a strong proponent of lenders using internal performance data to manage and improve their performance, according to senior partner Dr. Matt Lind, it is only by comparing peer-to-peer performance, i.e., benchmarking, that lenders will gain the most accurate and useful assessment of their competitive performance.

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“Mortgage lenders have utilized virtually the same metrics to assess performance for the past 30 years,” said Lind. “Considering how dramatically our market has changed during this time, STRATMOR felt it necessary to enhance the way lenders can measure performance versus peers. The result is a new approach, one based on a substantial lender-level data that enables lenders to place the efficacy of their operations in the context of peer performance on the same characteristics.”

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Lenders can apply STRATMOR’s new method for benchmarking production or servicing performance to virtually any traditional performance metric, from direct production margin and direct origination expense per loan to loans serviced per servicing FTE and more.

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“With common benchmarking comparisons, lenders are only able to make comparisons to the averages,” Lind continued. “This leads to statements like: ‘My direct retail origination expense per loan is $200 less than average,’ but with our new method, lenders can now determine how a value measures up or down in terms of standard deviations from the mean. The new method enables lenders to better judge performance, which is reflected in statements such as: ‘My direct retail origination expense per loan is equal to or better than 62 percent of lenders.’ The understanding gathered from statements like the latter are much more meaningful to our clients than the understanding derived from internal comparisons alone. The bottom line is that it is significantly more valuable for lenders to be able to measure against peers, rather than to simply measure against internal metrics.”

STRATMOR also details select findings from its 2016 LOS Technology Insight Survey (TIS), specifically, lenders’ opinions on the efficacy of functionality in their respective Loan Origination Systems (LOS). Less than 25 percent of lender participants indicated that the compliance tools in their LOS were ‘Highly Effective’ and afforded them a competitive advantage. Between 40 and 50 percent of participant lenders rated their LOS’ compliance functionality as ‘Adequately Effective.’

Additionally, STRATMOR’s TIS findings show ‘Lead Generation/Management’ as the lowest rated functionality. Only four percent of lender participants stated that their LOS provided ‘Highly Effective’ lead generation capabilities. ‘eSignature’ and ‘Product/Price/Eligibility Decision Engine’ capabilities were also among the lowest rated for effective functionality. A continued lack of functionality satisfaction in these important capability areas will most likely drive lenders to seek alternatives.

About The Author

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.