Mortgage compliance service providers are expanding their businesses through new partnerships and alliances and by expanding their client bases as mortgage lenders grapple with increased compliance challenges. The solutions promise to help lenders meet requirements imposed by the Consumer Finance Protection Bureau and federal laws.
Among a web of laws that impact home lenders are the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Secure and Fair Enforcement for Mortgage Licensing Act and the Fair Housing Act.
Lenders that don’t adapt to the current regulatory environment will face consequences, says Annemaria Allen, founder and president of The Compliance Group. Frequently, lenders can outsource compliance and quality control to “experts that live and breathe these regulations.”
“Compliance is the one controllable factor where lenders know they must focus,” Allen stresses. “Yes, marketing and relationship building are the bread and butter of origination, but compliance is the heartbeat of a sustainable mortgage lending and securitization lifecycle.”
San Marcos, Calif.-based Compliance Group, which has seen a steady increase in its business that has led to more than 100 percent growth since 2010, now plans to add Federal Housing Administration consulting and mortgage licensing to its many services, which include LicenseTracker a web-based application that helps mortgage businesses, branches, and loan originators maintain and track required state and federal agency licensing deadlines and continuing education requirements.
A new service, GFE Service, being offered by Jacksonville, Florida-based Lender Processing Services Inc. helps lenders accurately quote loan fees and eliminates the need to maintain internal fee tables and cumbersome, manual calculations for Good Faith Estimate disclosures. And it enables lenders to order GFE data through the LPS Loan Quality Gateway, powered by RealEC. The new GFE Service uses a provider network to deliver GFE settlement charges, which can help lenders manage tolerance requirements related to fees, amounts owed and adjustments shown on the HUD-1 form.
In another new service, Genpact Limited, which provides business process and technology management to the mortgage, credit union and banking industries, has integrated QuestSoft’s Compliance EAGLE into its Quantum Mortgage Operating System to help originators and lenders automate and streamline compliance reviews during the loan origination process.
The integration with Compliance EAGLE will enable Phoenix, Ariz. based Genpact’s Quantum users to check compliance and run reports throughout the loan process. QuestSoft not only provides compliance checks on national, state and local laws but also supports investor compliance guidelines. The software is fully integrated with Genpact’s Quantum, which reduces errors and improves accuracy, providing lenders a faster and lower cost option to ensuring successful loan origination and compliance.
The American Bankers Association has released a free, members-only resource to assist bankers with their ongoing compliance with fair lending laws. The ABA’s Toolbox on Fair Lending provides practical examples, how-to’s, and templates for bankers to use when reviewing compliance and preparing for fair lending exams.
“A number of cases brought recently by the Justice Department have made some banks anxious to know if their fair lending compliance programs are keeping pace with the latest legal interpretations,” says ABA Chairman Albert Kelly. “The goal of this toolbox is to help ensure that our member institutions are in sync with examiner expectations so that they get the sort of compliance credit they deserve.”
The Toolbox on Fair Lending is an update from the Washington, D.C.-based association’s first fair lending toolbox, which was released in the early 1990s. It includes resources on ensuring the board’s role in compliance; understanding legal fundamentals; implementing and updating risk assessments and compliance programs; conducting file analysis and second reviews; and preparing for and handling a fair lending exam.
And a new podcast, From the Bar: Inside Compliance with Roger Fendelman, that focuses on the industry’s toughest issues, has been launched by Agoura Hills, Calif.-based Interthinx. Fendelman, vice president of compliance at Interthinx, notes that rulemaking by the CFPB — and coping with the changes — has created many questions of concern to lenders. He hopes the regularly scheduled podcast will provide some answers.
“Compliance officers have never had a more challenging mandate than they do today,” Fendelman explains. “Attendance at compliance conferences has increased dramatically in the last year as these professionals reach out for guidance. Failure to ensure compliance has resulted in buyback requests, fines, loss of lines of business, and closure of business for many lenders. With hundreds of new rules coming down from various agencies this year, occasional conferences are not sufficient. From the Bar will provide detailed information and analysis that financial institutions can rely on.”
A purely legal service for dealing with compliance issues, the Fair Lending Task Force, has been created by the national law firm, Ballard Spahr LLP, which has offices in 13 cities. A team of attorneys with skill and experience handling a wide variety of fair lending issues, Ballard Spahr’s fair lending task force brings together regulatory attorneys who deal with fair lending law compliance, litigators who defend against claims of fair lending violations, and labor attorneys who understand the statistical analyses that underlie fair lending assessments and discrimination claims, explains Christopher J. Willis, an Atlanta-based partner in the firm’s Consumer Financial Services Group and one of six attorneys on the Task Force.
“We have attorneys throughout the firm with massive fair lending experience,” he says. “The task force pools our knowledge and know-how to deliver industry news, legal counsel, and business solutions to clients under the time pressures of fair lending issues.”
An announcement this week from Interthinx indicated that it has aligned with the MRG Document Technologies group at Middleberg Riddle & Gianna to provide attorney-backed compliance services and help lenders cope with new legal and regulatory compliance requirements. Independent file reviews and expert loan file analysis are part of the attorney-backed compliance.
On Monday, Comergence said that it has taken the lead in helping lenders company comply with a new anti-money laundering that went into effect on Aug. 13 requiring them to file Suspicious Activity Reports for certain loan transactions. The global Financial Crimes Enforcement Network established the program in accordance with the Bank Secrecy Act. The Mission Viejo, Calif.-based company said that it created a proprietary anti-money laundering certification process for existing lender clients. It also is providing reporting and analytics to track which of their residential mortgage loan originators have complied with the law.
Other compliance servicers have been busy expanding their client bases.
Durham, North Carolina-based Cognitive Options Group is now providing the firm’s operational advisory services to credit unions engaged in mortgage banking. As the industry continues to see historic low rates, explains Penny Showalter, managing director of Cognitive Options Group, credit unions are expanding mortgage lending product offerings to their members. With this expansion, she says, credit unions face increased regulatory risk and must be vigilant in meeting new regulatory and investor rules.
“As regulatory compliance for real estate financing becomes more complex,” she points out, “the need for credit union directors and management to understand the volatile rule making environment is critical. Growing fiduciary reasonability for a credit union’s leadership increases the need to engage mortgage industry experts for guidance.”
Closing Corp’s SmartGFE Service 2.0 will be provided to customers of Ellie Mae the mortgage management software Encompass360. SmartGFE 2.0, says Paul Mass, president of the La Jolla, Calif.-based company, provides an online solution that gives users fast access to RESPA-compliant GFE data, audit trail and a compliance guarantee.
A top U.S. bank has tapped Quality Mortgage Services for quality control risk mitigation support to help defend itself against investor repurchase claims. The institution, which the Brentwood, Tenn.-based provider of mortgage quality assurance and mortgage compliance solutions would not identify, has been faced with buy back defense challenges that persist even after working with other quality control vendors in the space, according to Quality Mortgage President Tommy A. Duncan. The bank had been through a number of QC repurchase defense vendors and felt it had been over charged by companies that underperformed, he points out.
“Quality Mortgage Services, which has been performing repurchase defense and writing responses to indemnification letters for mortgage bankers for 20 years, will collaborate with the bank’s risk staff as a force multiplier in order to neutralize the investor’s repurchases claims,” Duncan explains.
Other firms, including mortgage servicers and providers of quality control services, have entered into ties with compliance firms.
American Home Mortgage Servicing Inc. has formed a partnership with Plano, Texas-based Compliance Connections to proactively manage and address potential code issues for its property portfolio.
“If a window is broken at one of our properties or has other violations, we need to know about it so we can take care of it right away,” says Rance Halfmann, vice president of default operations support at American Home, which is now known as Homeward Residential. “That’s what Compliance Connections will help us do. Through the system, a code enforcement officer can notify us immediately so we can act promptly to keep our properties and surrounding neighborhoods safe and secure and maintain property values.”
Similarly, The StoneHill Group, a nationwide provider of quality control audits, fulfillment, due diligence and FHA insuring solutions for mortgage originators, has completed a strategic alliance with MRG Document Technologies, a provider of mortgage document preparation software and mortgage compliance technology and expertise.
The StoneHill-MRG alliance, says David Green, president of Atlanta-based The StoneHill Group, will add value to clients of The StoneHill Group through the use of MRG’s CompliancePlus solution.
“Mortgage companies, credit unions and banks will benefit from this partnership because the management teams share a passion for quality in the services provided,” Green explains. “Our management and staff have direct experience in the origination, underwriting, closing, post-closing, sales, and administration of file assets. And MRG will deliver accurate, compliant document packages and complete the legal reviews required by state law in Texas.”
