If you work in the mortgage industry, then you know how clear the Consumer Financial Protection Bureau (CFPB) has been that both mortgage originators and servicers must follow the new servicing rules that took effect in January 2014. In case anyone had doubts, there’s now proof of how serious this is to the CFPB — enforcement actions involving violations of the new rules are starting to occur.
As of July 9, 2014, CFPB enforcement actions have resulted in $4.6 billion in relief for roughly 15 million consumers since the CFPB opened its doors in 2011. This includes actions for mortgage kickbacks, mortgage lending, mortgage servicing, mortgage data reporting, and more. (Consumer Financial Protection Bureau, July 21, 2014)
The Mortgage Loan Process Isn’t What it Used to Be
The mortgage loan business has always been a very document-intensive business. However, since the housing bubble burst in 2008, the average size of a mortgage application packet has continued to increase substantially, as more disclosures and other documents have been required for the loan file. In fact, David Stevens, CEO of the Mortgage Bankers Association has been quoted as saying that the average mortgage application file has ballooned to more than 500 pages in recent years (CNN Money, December 2013).
The CFPB’s new rules cover a broad range of mortgage origination and servicing activities. Some of the most important requirements relate to management of documents and data. For example, servicers must now retain records for a year after a mortgage loan has been discharged or the servicing of a loan has been transferred. Documents and data must also be managed in a way that they can be compiled into a “servicing file” within five days of a request. Meanwhile, mortgage originators must have verified and documented information that a borrower has a reasonable ability to repay the loan. In order to make this determination, mortgage originators will need to have confidence in a fully reliable origination and compliance system.
Compliance is Key
Information management and data integrity are critical in today’s mortgage environment. After the housing meltdown, the industry saw the first explosion of additional documents that needed to be included in mortgage applications. But the new rules make it even more essential that documents and data are accurate and consistent.
By implementing a comprehensive document management system, mortgage lenders and servicers can:
- Capture more data from loan documents than ever before
- Ensure complete data and documentation has been collected
- Have access to chain-of-custody information
- Apply automated business and compliance rules
- Access dashboards providing analytics pertaining to areas of exposure
- Mitigate risk and exposure to fines and repurchases.
So what does it take to be in compliance these days? The bottom line is that analyzing loan portfolios for quality and compliance is now something that must be done during the entire lifecycle of a loan. One, single system (i.e your LOS or Servicing system) is not enough. In today’s complex lending environment, a document management solution can help to simplify loan origination and servicing, while maintaining compliance with the CFPB mortgage servicing rules.
How could a document management system simplify your mortgage processes? How could a document management system work in tandem with your core systems to minimize risk and exposure?