Need Compliance Help? Look No Further

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WE’RE HEARING DocuTech, the Idaho-based provider of document and compliance technology for mortgage lenders, has been lauded for its hiring spree as of late. The company increased its staffing by 10% last year and more recently added another nine employees to its payroll, bringing the 21 year-old company to 75 employees nationally.

In recent months, several of the industry’s largest lenders became new clients, the company said in announcing the expansion. Since coming out of the housing crisis in 2008, DocuTech has exceeded revenue and customer growth of 30% each year.

Last week, I had the chance to ask CEO Scott Stucky what’s driving the firm’s growth. He said one factor fueling the company’s growth is the changes to the regulatory and compliance landscape that lenders are grappling with. Earlier this year, the Consumer Financial Protection Bureau came out with several big new mortgage rules.

In the past, most large mortgage lenders did their own document and disclosure compliance work in house. Stucky said that’s been changing over the last couple of years, as compliance officers have found themselves overwhelmed trying to manage the operational and procedural implications of all the new regulations and guidelines. Compliance departments needed to “get something off their plate,” he said.

“Compliance is a real hot topic in the mortgage lending industry right now,” Stucky said. One of the areas they can get some help with is with document compliance.”

“We think that is going to continue. We think our solution fits very well with the large lender community.”

The CFPB’s latest flurry of rule making is just the latest in a string of compliance changes that the home finance industry has faced in recent years.

“I think the straw that broke the camel’s back was the loan officer compensation rule two years ago. That just changed the game. It was a huge undertaking for every lender,” Stucky said.

In addition to compliance and legal expertise, Stucky said that technology is essential to meet documentation and disclosure requirements. He said DocuTech creates “dynamic” documents that can be quickly updated or changed in response to regulatory or compliance shifts made by states or the federal government. One “dynamic” document incorporating different rules for different locations and loan types can be used for all 50 states, rather than having 50 different documents that have to be changed individually whenever a new rule comes into play. The company is integrated with different loan origination systems so that it can receive data electronically.

Asked if technology or legal expertise is more important in the doc compliance world today, Stucky said that both are essential.

“You have to understand the laws and you have to understand the guidelines. If you don’t have that, the lenders really can’t operate. There is so much liability.”

But technology facilitates keeping track of the flurry of rule changes that lenders face, he said. Without technology, nuances of the evolving regulatory landscape could easily be lost in the shuffle.

Intriguingly, DocuTech, which surveys lenders to track changes in home loan closing costs, found a decrease in average closing costs last year despite the burdens associated with adapting to more stringent regulatory oversight. Stucky said that with all the new rule changes, he would have expected closing costs to rise. Closing costs on average fell almost half a percentage point, from 3.112% in April of 2012 to 2.521% in November of last year among the company’s clients.

Stucky said the large share of refinancing transactions, which tend to be more “price sensitive” than home purchase loans, may account for the decrease.

Ted Cornwell has covered the mortgage markets since 1990. He is a former editor of both Mortgage Servicing News and Mortgage Technology.