One origination technology provider thinks the many different components of compliance need to be managed from a single system, not only because of compliance risk alone, but also because of buyback or pushback risk.
“People used to think about compliance as an adjunct or something they do as a sampling function. People now talk about using compliance services as add-ons or bolt-ons to whatever they’re doing with their origination system. Our view is that compliance really be built into everything a mortgage lender is doing cutting across all aspects of the process and the technology, all the way from point of service and point of sale all the way through investor delivery. It really can’t be an add-on,” Jonathan Corr, chief strategy officer for Ellie Mae, told this publication.
“You’ve got the pressure both on the federal and the state agencies and regulators that are changing existing rules, introducing new rules and cranking things up across the board,” he said. “At the same time people are concerned about quality given what we went through in terms of the market disruption.
“Investors and the GSEs are demanding quality and what goes with that is, 'I’m going to look at every loan coming through the process and I’m going to take advantage of any loophole I might have if there is a loan that is nonperforming.’
“The fact is that the investors and the government-sponsored enterprises want greater transparency. They want greater quality. They don’t want to be in the same position they were and they’re doing a much better job on their end of reviewing loans and that includes compliance.”
Compliance is a key and perhaps one of the more avoidable forms of buyback risk as it tends to be easier to find and avoid upfront than say, fraud, Corr said.
But staying compliant continues to be easier said than done.
“You’ve got to ensure that you’re staying up with all the federal and state changes that are happening as fast as you can blink your eyes,” he said.
When asked for examples of kinds of compliance concerns technology can catch, Corr said, “Changes in the Truth in Lending Act, 'high-cost’ loan issues, we see those things caught all the time, a lot of state issues that have come into play. The system is catching those types of things every day and basically helping people avoid the buyback or the push back.”
And the compliance changes keep on coming, Corr noted. “We’ve got more TIL changes with April 1 in terms of LO compensation. We’ve got more state regulations rolling in. We’ve got Dodd-Frank rolling in with the CFPB starting in July.”
Corr said this was one of the reasons Ellie Mae bought a document company and a compliance automation firm.
“Our lender customers are responsible for the compliance, but rather than them trying to really worry about doing it manually or using disconnected systems, we try to make as productive as possible, so you can make sure that you’ve underwritten the loan to...guidelines and nothing is falling through the cracks.”
Alerts and notifications are increasingly being used to help users do this, he said. “If everything’s going well, it’s not going to tell you that there are any issues.” If there’s an issue it’s going to raise a flag, cutting through the noise and bringing it to the attention of the individual that’s responsible.
