Are your Mortgage Lending Policies and Procedures both Current and Compliant?
Whether you are a mortgage broker or mortgage banker, it is critical to understand if your mortgage lending policies and procedures are both current and compliant!
Having mortgage lending policies and procedures that are both current and compliant is a critical step towards establishing the compliance foundation needed to be successful in our current high risk regulatory environment.
In today’s short video, I will review the importance of having compliant policies and procedures as well as provide an overview of the many regulations that govern the mortgage lending process.
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As the industry continues to shift, compliance is front and center with the recent spree of mortgage loan repurchase requests showcasing the need for mortgage lenders to bring their “A” game in that regard.
Additionally, the CFPB states in part the following under § 1007.104 Policies and procedures:
“A covered financial institution that employs one or more mortgage loan originators must adopt and follow written policies and procedures designed to assure compliance with this part. These policies and procedures must be appropriate to the nature, size, complexity, and scope of the mortgage lending activities of the covered financial institution, and apply only to those employees acting within the scope of their employment at the covered financial institution.”
With that being said, it is unfortunate that many brokers and bankers are utilizing severely outdated policies and procedures with some being from years and years ago. For those that do have updated policies and procedures in place, you also need to ask if they are sufficient to cover the vast array of regulations that govern mortgage lending?
Relying on outdated procedures can cause harm to both the consumer and the organization itself, along with concerns when dealing with regulators, state auditors, warehouse banks, and investors.
Additionally, a lack of compliance can lead to fines, penalties, loss of reputation, and consumer trust. Being proactive through robust policy and procedures is another way to help preserve an organization’s reputation and profitability because in today’s market, every basis point counts!
Policy and Procedures
As a quick overview, policies are defined by rules and regulatory requirements such as those found under RESPA, HMDA, ECOA, and TRID. Additionally, organizational policies will provide an outline for how to manage a company’s day-to day operations and define its long-term goals.
On the other hand, procedures describe how the organization will fulfill the policy requirements and will contain the specific tasks and steps needed to carry out the policy implementation.
Federal Policies and Procedures
Examples of federal policies you should have include, but are in no way limited to the following:
- Appraiser Independence Policy (AIR)
- Compensation and Anti-Steering
- Compliance Management Plan
- Disaster Recovery Plan
- E-Disclosure and E-Signature Policy
- Equal Credit Opportunity Act (ECOA)
- Fair Credit Reporting Act Policy
- Fair Housing Act
- Fair Lending Plan
- Mortgage Disclosure Improvement Act
- Real Estate Settlement Procedures Act Policy
- Record Retention Policy
- Unfair Deceptive Abusive Acts and Practices (UDAAP)
- USA Patriot Act Policy
- Vendor Management / Counter Party Risk
- Business Continuity / Disaster Recovery
Please note that this is not a comprehensive list of the federal policies to be aware of and that you will need to be prepared for multiple other policies to have procedures built around.
State Specific Policies and Procedures
Additionally, understand that some states may have additional required policies such as in California where you would need to be prepared for interim servicing, servicing, and subservicing policies as well as a per diem policy, accounting, and California privacy requirements.
When it comes to mortgage lending compliance, the requirements can be downright overwhelming! However, remember that Rome was not built in a day, so a good staring point can be to break down the components one by one to see what your organization requires.
Do you need help?
If you need additional assistance with climbing the mortgage banker ladder that is where we step in to help!
With our practical expertise and understanding of the process from mortgage licensing, investor approval, warehouse bank selection, third party fulfilment providers, E&O and Surety bond companies, origination strategies, coaching, compliance, consulting, and more!
You can simply use our online scheduler to select a convenient consultation time and let us show you the Path to Prosperity!
Sean A. Stephens, Esq., CMB®
Broker to Banker Consulting, LLC
Call/Text: (714) 844-7146
Toll Free: (866) 989-0564
P.S. If you have not yet done so, remember to download our Broker to Banker Blueprint for Success with the link below. This free guide is designed to walk you the the banker transition process and is a great educational resource for mortgage brokers and bankers alike.
Sean A. Stephens, Esq., CMB®
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