Skip to main content

Creating Policy is Only Half the Battle

David Rassmussen
Dec 02, 2013

It’s starting to happen: The audits, compliance reviews and vendor assessments. From top to bottom, the industry is seeing regulators and investors make good on the promise of investigating lender compliance with the advisories published over the last five years. It’s a day lenders knew would be coming, so there shouldn’t be much of a surprise here, but that doesn't mean lenders are fully prepared. The Dodd-Frank Act introduced a number of regulations, which were quickly followed by an update to the Interagency Appraisal & Evaluation Guidelines, and since then, requirements have continued to flow from various stakeholders. Many of the directives have required lenders to implement policies and procedures around various activities. As lenders navigated the course from 2009 to present, they have spent countless hours examining and documenting the safest and most prudent protocols for their business. Are there policies and procedures for valuation ordering? What about oversight and management of vendors? These are just two of a myriad of questions lenders need to have documented. Whether they are bound in fancy notebooks or saved in secure company intranets, there is one important message that all lenders need to hear before their audit takes place: Documenting policy alone is not enough. It’s well and good to have thorough documentation of a business operations plan, but it’s just the first step. What is equally if not more important is an audit trail of how protocols are being carried out. Be advised that regulators will not only be asking whether policies exist, they will be asking for validation that policies are being executed in day-to-day operations. This is where the issue of preparedness truly comes into question. Lenders who are leveraging the appropriate technology and automated tools have some of the greatest advantages when it comes to this issue of preparedness as their technology is most likely documenting daily execution effortlessly behind the scenes. As the natural implementation point for many policies, the utilization of technology can provide validation to examiners that policies and procedures are in motion and working effectively. A valuation management platform should have the established rules for valuation ordering incorporated into the workflow, developing audit trails as each order flows through the system. Additionally, strong software-as-a-service (SAAS) platforms allow lenders to automatically generate data such as vendor turnaround times, product quality, etc. These data points become tangible pieces of evidence on a vendor’s service(s) making vendor management a more objective, measurable and compliant process. To assist with compliance documentation, systems should also be able to provide scheduled reports that automatically deploy to users at set intervals, evidencing key information and metrics for management review. Two parting thoughts as you consider the role of valuation technology in your compliance documentation strategy. First, make sure the technology is flexible enough to allow you to modify as internal or external forces require shifts. Regulations will change and technology needs to be able to stay in step with adjustments to policies and procedures. Second, if you have not already approached your technology provider(s) to have a candid discussion on how the systems you are utilizing can be leveraged to evidence compliance, do so before you are caught unprepared. David Rasmussen is senior vice president of operations at Veros Real Estate Solutions. For more information, call (714) 415-6300 or visit
Dec 02, 2013