CO M P LI A N C E
A Fast-Moving Target
I
THE EVOLVING BUSINESS OF COMPLIANCE MANAGEMENT
f loan production provides the life blood of the modern lending enterprise, it’s the compliance department that keeps the company from bleeding to death. That’s what it can feel like when a regulator finds a compliance problem that has been hiding in your loan production process and impacted hundreds or even thousands of borrowers. Believe it or not, there was a time when keeping a financial institution in compliance was much simpler. Today, the fast pace of new technology adoption and an enhanced regulatory focus on protecting consumers at any cost has changed the way we manage compliance. Our business is all about providing tools and technology that make compliance management easier for lenders, but failure to fully embrace the concepts in this article can render even the best tools ineffective. Before I get into that, let me explain why compliance today is a fast-moving target and why it will likely be that way from now on.
By L EO NA RD RYA N , QU ESTSOF T nology partners make to the tools the lender is currently using. Over the past few years, we have watched lenders rapidly adopt new digital processes for loan origination. While that has not, in and of itself, changed the dynamics of compliance, it has introduced additional compliance risk to the loan origination process. As these new tools are added to the lender’s tech stack, the compliance management team must spring into action. Introducing unintended compliance problems into the lender’s process when updating technology is something we’re seeing more often. For instance, a lender could implement business rules inside systems to streamline processes, but that change could negatively impact compliance risk management efforts.
tion and quicker correction of compliance issues within loan records.
In fact, the rapid rate of change in digital origination technology means that it is now statistically more likely that a lender will unintentionally increase compliance risk than implement effective controls. Of course, companies like ours are constantly monitoring changes in the lender’s technology to identify and adapt compliance controls to limit risk. This allows earlier detec-
for compliance management has necessarily evolved. Today, lenders must monitor their people, processes, and technology on a constant basis, ever vigilant for the compliance issue that can be the precursor to many future problems. For example, we recently assisted a lender in building an integration to our reg-
THE IMPACT OF EVER-EVOLVING TECHNOLOGY
Automation has delivered a great many advantages to the mortgage industry and the borrowers it serves. Technology has largely delivered on its promise of better, faster, and cheaper, though not all tools have delivered all three, or even two. Automating a broken process is a sure way to fail in enhancing profitability and limiting compliance risk. Because every change made to a technology carries with it the risk of inserting an unintentional violation of law into the lender’s process, and because technology is constantly changing, the lender’s process
TWO REASONS COMPLIANCE IS REALLY HARD
Every time a new or modified rule is implemented by any regulatory agency, compliance officers must react. What we’re beginning to realize across the industry is that complications can also arise anytime a lender makes a change to the loan production tech stack. And issues related to that are happening more and more often. Today’s compliance management programs must monitor more than just changes coming out of the industry’s regulatory agencies. They also must monitor and measure the impacts of every change the company makes to its technology, products, and processes, as well as any changes its tech20 MORTGAGE BANKER | FEBRUARY 2021
