We came across a well-written article recently titled “The New Rules For Compliance In The Post-Crash Environment” by Louis Pizante, CEO of Mavent, Inc. and a veteran of the industry.
In addition to a concise synopsis of the events leading up to the current regulatory overhaul of the mortgage industry, the article outlines some of the changes we can expect in the way compliance reviews are performed. In short: earlier in the origination process, more electronically and with greater automation.
Mortgage compliance and quality control reviews can and should be performed on many levels, and at different points in the loan life cycle. Tools such as automated compliance engines, automated fraud engines and automated valuation models can flag loans that merit further review. The next step is to apply a rigorous methodology to digging deeper in order to:
1) determine whether a complete file review confirms the automated findings;2) fix the individual loans if possible;3) identify the source(s) of the issue(s);4) select additional loans from these source(s) and conduct complete file reviews to see if there is a pattern of issues;5) generate feedback to the field and document corrective actions to fix the flaw(s) in the origination or servicing processes and/or stop doing business with the identified sources.
We are seeing more tools for automating more aspects of the mortgage life cycle. Don’t forget, though, that it was partially the over-reliance on automated underwriting tools that got us into our current mess. Maybe tomorrow will be different, but today we still need human beings checking to see if it all makes sense.