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Follow on Google News | Mortgage Industry Shows Growing Concern for Managing Loan-Level Compliance RiskProjecting a more complex regulatory landscape in 2009, ComplianceEase expects technology adoption trend to continue
By: ComplianceEase Despite a lagging global economy and an overall downturn in the U.S. residential mortgage market, in 2008 ComplianceEase added close to 150 new financial institutions and service providers to its growing list of ComplianceAnalyzer® “With the industry facing a perfect storm of challenges including decreasing margins, lack of resources, and increasing regulatory oversight, technology appeared essential for the industry to manage loan-level compliance risk, said John Vong, president and co-founder of ComplianceEase. “New Federal and state legislation aimed at protecting consumers and increasing regulatory oversight will help the industry to regain credibility. However, lenders and originators must prepare themselves to operate in this relatively uncharted regulatory environment. The 2009 compliance landscape is going to be much more intense for the industry than years past. Lenders will need to leverage technology and automation in order to mitigate the regulatory and litigation risks,” noted Vong. Without question, concern for increasing regulatory requirements and enforcement drove much of the compliance technology adoption in 2008. According to ComplianceEase’ Don Lampe, outside regulatory counsel to the company and partner at Womble Carlyle Sandridge & Rice, PLLC, explained some of the trends he and his firm are observing, “What you saw in years past was a focus by the states to curb the so-called high-cost lending, effectively placing ceilings on the total rates and fees that lenders could charge. We expect the states to dig deeper below the surface of what is charged on a loan.” Mr. Lampe and ComplianceEase expect that the industry will face new restrictions that zero in on what specific types of rates and fees are charged, how they are charged, and whether they are deemed appropriate for the borrower and loan in question. This all adds up to a new standard that many in the industry refer to as “suitability” In 2008 sweeping changes were also made at the Federal level to the three most significant pieces of mortgage lending regulation: The Home Mortgage Disclosure Act (HMDA), the Real Estate Settlement Procedures Act (RESPA), and the Truth-in-Lending Act (TILA). The Federal government also effectively imposed its own set of reforms on mortgage licensing and oversight at the state level by passing the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (commonly referred to as SAFE Mortgage Licensing Act or simply the SAFE Act). In addition to setting minimum standards for mortgage lender and originator licensing, the act calls upon states to grant their regulators authority to examine, in detail, the books and records an originator keeps concerning its operation. States are likely to spend more time looking at the overall lending operation of licensed originations, not just how much they are charging on individual loans. For Franklin American Mortgage — one of the fastest growing mortgage companies in the United States — the choice to place automated compliance controls on every loan they originate was an easy one. Increased legislative activity across the country made automated compliance technology the only way to continuously adapt their business to the changing lending environment. Burton Embry, vice president - compliance and quality assurance at Franklin American Mortgage explained, “Without technology in place I don’t see how any reasonably-sized lender could be sure that their loan production was 100% in compliance with all of the applicable Federal, state and local laws and regulations. With far fewer outlets to sell our loans and much stricter guidelines, it’s more important than ever for us to maintain a reputation for quality in the industry. ComplianceAnalyzer enables us to do that without additional manpower.” With no signs of slowing in mortgage lending regulation, increasing numbers of mortgage industry participants are expected to follow suit and turn to compliance technology in 2009. ComplianceEase’ # # # About ComplianceEase ComplianceEase, a division of LogicEase Solutions Inc., headquartered in the San Francisco Bay Area, is a premier provider of intelligent business solutions to the financial services industry. ComplianceEase's patented platform includes ComplianceAnalyzer – the mortgage industry's leading automated compliance solution. ComplianceEase combines industry and regulatory compliance expertise with innovative technology to power beginning-to- End
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