Mortgage Compliance Software Archives - Cogent QC: Award-Winning Loan Quality Control & Compliance Software

New Mortgage Servicing Rules Take Effect

January 13, 2014 By Kaan Etem

The new mortgage servicing rules that the CFPB finalized in January 2013 became effective January 10, 2014, affecting the Truth in Lending Act (TILA) under Regulation Z and the Real Estate Settlement Procedures Act (RESPA) under Regulation X.

The amendments are intended to provide borrowers with detailed information regarding their loans, ensure that mortgage servicers do not unexpectedly assess borrowers with charges and fees, and ensure that borrowers are informed of alternatives to avoid foreclosure. The final rules should also provide borrowers with more timely and accurate responses to their complaints by requiring servicers to follow certain error resolution procedures.

As a servicing QC and compliance professional, you have already been preparing for the additional information and data tracking requirements, as well as the process changes. With luck, your auditors are trained and ready. And your software has been updated and tested to reflect the changes.

If you’re a Cogent client, this means you have updated your audit questions and implemented the appropriate question trigger rules. Maybe you’ve introduced additional findings options and workflow updates and configuration tweaks. Alternatively, you may be puzzling through how to put the pieces together most efficiently. If so, let us know at info@cogentqc.com. We are here to help.

Lenders’ Dilemma: Invest in Tech or Exit Mortgage Business

October 28, 2013 By Kaan Etem

Here’s a timely article (registration required) highlighting how the new regulatory environment for lenders is forcing a stark choice: either invest in technology to streamline and automate loan origination and servicing processes – or exit the business.

Some choice excerpts:

“Origination costs are expected to rise 11% this year from a year ago, to nearly $5,900 per loan, as lenders scramble to meet tough new requirements from the Consumer Financial Protection Bureau, the Federal Housing Administration and Fannie Mae and Freddie Mac that take effect in January.”

“Large banks can justify investments in technology and can hire more staff because they spread the costs across more loans. But small banks with fewer than 100 employees may only have a handful of employees doing the work, which means relying even more on technology…”

“…921 compliance changes [have been documented] from various agencies since the housing market crashed in 2008. Particularly challenging for small lenders are new requirements from Fannie and Freddie that require lenders to deliver loans with as few defects as possible.”

“The government-sponsored enterprises are now electronically validating 100% of the loans they purchase as part of a broader initiative to improve loan quality. The Federal Housing Administration has proposed similar changes and may set a maximum threshold for the percent of loans it will allow to have defects.”

“Survival is dependent on improving quality control standards otherwise [lenders] won’t be able to compete or to sell loans that the GSEs will be willing to buy,” says Craig Focardi, CEB TowerGroup’s senior research director.”

“Everybody is extremely nervous because if you don’t dot your i’s and cross your t’s in compliance, you’re going to get a lot of repurchases and will be out of business. Everything in a loan file has to follow the letter of the law.”

“Many lenders don’t want to invest in the labor and technology that it takes for [quality control] and compliance,” says [Annemaria Allen, president and CEO of The Compliance Group in Carlsbad, Calif.], noting that such requirements have never really been enforced to the degree that they are now. “You have to be able to slice the data and we know that business units are screaming about this. But if you’re going to sell to Fannie and Freddie and you do a [lousy] job…they will be in your house nonstop and make sure you have the processes in place and embrace quality.”

Forewarned is forearmed. It’s a very different industry now than it was in 2007.

Secondary Review Options in Cogent QC Systems

October 14, 2013 By Kaan Etem

In the most recent issue of American Banker, the CEO of Cape Cod Savings had this to say about the burden of regulatory compliance:

“…Because of HMDA and RESPA, we have checkers who check the checkers. Then we actually have another third layer of checkers who check the checkers who check the checkers. Then we have two outside consulting firms that check again.”

Sound familiar? All too familiar for some Cogent clients, who have multiple layers of QC and compliance operations – often at the corporate level, at the business unit level, and on an outsourced basis. And they invest so much in quality control and compliance because the alternative is painful. To cite just one instance, the Mortgage Bankers Association (MBA) sent this around last week:

“CFPB Assesses Civil Money Penalties For HDMA Data Errors
The CFPB has announced that it assessed civil money penalties against Mortgage Master, Inc., a non-bank, and Washington Federal, a bank, after examinations identified significant data errors in mortgage loans reported pursuant to the Home Mortgage Disclosure Act (HMDA). CFPB followed the announcement with a bulletin outlining the elements of an effective HMDA compliance management system and the resubmission thresholds, as well as other factors that the Bureau uses to determine if they will pursue a public HMDA enforcement action and associated civil penalties.”

Among other things, that bulletin states that “effective HMDA compliance management systems frequently include … comprehensive and regular internal, pre-submission HMDA audits.”

Aside from under-scoring the sheer scope of today’s regulatory compliance requirements, this reality also highlights the need for efficiency in performing secondary and tertiary audit reviews. This is why Cogent has been introducing more extensive secondary audit review options. The latest Supervisor Override functionality was covered in our recent ‘Version 4 Overview’ webinar (clients may contact support@cogentqc.com for a link to the recording.) With that, the possibilities now include:

Revert a completed loan audit and make changes to the original loan audit.
Use Supervisor Review to conduct a parallel supervisor audit, while preserving the original auditor’s work as the official audit of record.
Use Supervisor Override to override individual findings, thereby modifying the official audit of record but preserving a record of the original auditor’s findings.

These different approaches can be combined with appropriate pending and completion of loan reviews to tailor different secondary reviews to different situations. When all eyes are on you, it’s always good to have options.

Cogent Clients Feature Among Fannie Mae STAR Servicers

August 27, 2013 By Kaan Etem

Fannie Mae has just revealed its Servicer Total Achievement and Rewards list (STAR), profiling the servicers who rank high when tested on customer service and other key metrics. Four of the seven top-ranked servicers are Cogent clients, which means that either Cogent is in good company or vice versa! Either way, it’s validation of Cogent’s focus on best practices in the increasingly important servicing quality control function.

The top-ranked servicers include: Green Tree Servicing, Nationstar Mortgage, Ocwen Financial Corporation, PHH Mortgage Corporation, PNC Financial Services Group, Inc., Seterus, Inc., and Wells Fargo Bank.

Among other sources, Housing Wire cites the news at https://www.housingwire.com/articles/26473-fannie-mae-ranks-top-servicers, where you’ll find more info and links.