Compliance Automation Strategy Still Can Help Differentiate Volumes

Laggards in adopting compliance technology can take a long time to get up to speed. Credit: © alexcoolok - Fotolia.com.

Based on all the talk about using efficient automation to address compliance needs, you might think that everyone was doing it, but the truth is there is still opportunity to differentiate volumes this way because adoption is slower and technology is not as uniform or widely available as you might think.
Paul Mass, CEO of Closing Corp., said he found—as head of a company that supplies data and technology to help with Real Estate Settlement Procedures Act compliance and previously when working in the television and radio area—that laggards in adoption persist for some time.
“It sometimes can take years for people to react to regulatory changes,” he said. “It is human nature to not want to change the way to do things and sometimes people are afraid of technology…It does not happen as soon as you might think.”
Mass said some relatively larger banks as late as earlier this year were just starting to automate 2010 changes to RESPA as they realized it could boost their profitability. Smaller players tend to take even longer, he said.
He expects this trend to recur when it comes to pending changes to borrower disclosures in the Real Estate Settlement Procedures Act and the Truth in Lending Act.
While some resistance to compliance still exists, Mass said it has reached a point where “it cannot be done anymore manually.”
Gaps in compliance automation still exist even in rules that are not in the throes of change. Lindsay Duncombe—compliance officer at Bank of Lake Mills in Wisconsin—found an automated function her bank was looking for was not widely offered and chose its current vendor, D+H/Mortgagebot, in part because it did.
Duncombe said the bank, which lends outside of areas where Home Mortgage Disclosure Act reporting is required, wanted something that would address its need as a non-HMDA-reportable bank to collect and report government monitoring information required on certain loans.
But it found that systems tended to be designed to address the needs only of HMDA reportable banks and tended to request the information across the board instead of selectively offering it. “We’re only required to gather [government monitoring information] on certain loans and not on others. If we collect it when it is not required, then that is a violation to us as a bank, so we need to make sure that piece is correct,” she said.
“It’s hard for the non-HMDA-reportable banks that are out there,” because a lot of the technology was designed for HMDA reportable banks, Duncombe said. “We needed to find one to do what we needed.”
By putting in place automation that handled this is a non-intrusive way for borrowers, the bank has been able to “take extra time to focus on customers,” she said.
“We were able to format our front-end system and ask when it was required…[and leave it out]…when it was not required,” Duncombe said. “It was all really seamless to the customers…It didn’t delay their application process…It will ask for it as the customers are going through their application online. We don’t have to worry if that information is on there or not when it is not supposed to be.”
The move helped the the Bank of Lake Mills “approve more applications” because it was able to identify when the request should be made based on the loan type, she said. Without the technology, it would have to do that by hand, over the phone or by mail.