Dominic Iannitti, president and chief executive officer of DocMagic Inc., a provider of fully-compliant, loan document preparation and delivery solutions for the mortgage industry, has called on all loan originators (LOs) to integrate automated loan file audits in their workflow throughout the mortgage production chain, from the time borrowers submit an application to the time loan file documents are prepared for delivery to the secondary market.
“The traditional approach has been to perform an audit at the conclusion of the loan, before closing, but that’s not good enough anymore,” Iannitti said. “Only by monitoring compliance at every stage of the loan production process—from the time a borrower submits an application, to the time documents are prepared and packaged for investors, to every stage in between—can we be assured that the loans we originate are going to meet investor guidelines and compliance requirements so that down the road, lenders won't be plagued by repurchase demands.”
Compliance remains a serious issue as evidence of problematic loan files in the mortgage industry continues to persist. For example, Fannie Mae, the largest purchaser of residential mortgages in U.S., reported in February 2012 that it made a total of $23.8 billion in repurchase requests from lenders during 2011. That was an increase from $13.1 billion in repurchase requests in 2010. In fact, some lenders continue to owe billions to Fannie Mae for troubled loans.
Iannitti pointed out that the technology exists today to check loan files for compliance at virtually any and every step in the process.
“In a fraction of a second, DocMagic’s audit engine performs over 1,000 compliance, regulatory and investor guideline checks, and provides analytics to the user at every step of the way. Additionally, by integrating automated audits into production workflows, lenders can eliminate the need for separate compliance vendors,” Iannitti said. "With many of the loan parameters being set at inception, data integrity is essential to the entire origination cycle. Not only does a lender need to be aware of data that has changed, but equally important is data that has been lost along the way. By leveraging DocMagic’s Audit engine throughout the process, any degradation of data is detected automatically."
DocMagic’s compliance solutions are available automatically by using DocMagic for loan document preparation and delivery, or as a standalone solution for lenders that use other doc prep services but want to check loans for compliance and adherence to investor guidelines at any stage in the process. DocMagic is able to check for compliance with Regulation Z (Truth-in-Lending) requirements, Mortgage Disclosure Improvement Act (MDIA), applicable federal and state audit tests, or under Fannie Mae or Freddie Mac's guidelines.