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Study Finds Mortgage Industry Runs Compliance Audits Every Four Seconds

Oct 25, 2010

ComplianceEase, a provider of mortgage compliance and risk management solutions has announced that the mortgage industry increased usage of ComplianceAnalyzer, the most adopted automated mortgage compliance system, despite a projected slowdown in loan origination. By mid-October the company reported that the industry had noticeably stepped up implementation of automated compliance controls, running a ComplianceAnalyzer audit every four seconds. The Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) spans numerous aspects of the financial system, from stability of financial institutions to consumer protection. With implementation still forthcoming, the prospect of strict new rules poses unique compliance challenges for banks and mortgage lenders across the nation. In particular the reporting requirements and information sharing with state agencies expected to emerge in the coming months have the industry looking at loan-level data collection and compliance very closely. Broader examination is not an entirely new prospect for the mortgage industry. Through the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR), the residential mortgage industry has known for some time that multi-state regulatory examinations were on the horizon, as states signed agreements to cooperate on examinations of larger lenders. In March of this year, a settlement agreement with a multi-state lender included 35 states, illustrating the various agencies’ intention to work together. ComplianceEase attributed the increase in usage of automated compliance to the industry’s expectation that inter-agency information sharing and multi-state enforcement trends will continue. “In a time where origination growth is slowing, third quarter usage of ComplianceAnalyzer increased more than 20 percent over the previous quarter," said John Vong, CMB, president of ComplianceEase. "As state mortgage regulators look to increase their compliance audit coverage, it’s clear that the industry has started to do the same.” Further illustrating the trend towards multi-state collaboration, the National Association of Attorneys General announced on Oct. 13 that Attorneys General from 50 states would be working together with state bank and mortgage regulators to investigate possible irregularities with mortgage foreclosures. The foreclosure investigation includes participation by the Multistate Mortgage Committee (MMC), spearheaded by CSBS and AARMR, with nearly 40 state regulatory agencies participating in total. That investigation is not the first time that the MMC has facilitated multiple states working together on enforcement. Through agreements signed by all 50 states as well as the District of Columbia and Puerto Rico, the MMC has been conducting pilot examinations of lenders who do business in multiple states. All signs point to 2011 as the year that this new type of multi-state regulatory enforcement will really start to pick up. Several states have informed their mortgage licensees that they will require submission of loan-level information in electronic form as part of a new electronic examination (e-Exam) process starting next year. It is expected that the MMC will continue its work towards implementing multi-state examinations beyond the pilot phase. Jason Roth, CMT, senior vice president of ComplianceEase, said, “Technology is the key to making the broad changes outlined by Dodd-Frank as well as the multi-state examination initiatives a reality. Regulators are using compliance automation to work towards 100 percent coverage in e-Exams. So it’s no surprise that lenders are following suit and auditing more and more loans with ComplianceAnalyzer. In the months and years to come, the only way you will be able to be certain of a favorable outcome for regulatory exams will be to have the necessary controls in place to audit every loan you originate or purchase.” For more information, visit
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Oct 25, 2010
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