The evolving role of chief compliance officers in selecting technology and vendors

Digital food for thought

The digital mortgage promise is compelling: new technology and better workflow meeting consumer, lender, servicer, investor and regulator needs and requirements — all built for compliance and protecting participants from unnecessary risk.

If executed properly, the transition from analog to digital drives value all along the mortgage continuum: improving customer experience and education, expanding capacity, reducing cost, minimizing fraud and shortening marketing-to-application approval cycle timing. Regulators have thrown support behind this evolution. Digitally-repeatable processes can help eliminate manual errors and provide auditable, transparent workflows, making compliance elements more transparent and easier to examine.

But digital success is not guaranteed: Get it wrong, and you’ve built a platform capable of automating repeatable defects, compliance errors and disclosure violations that could be viewed as fraud, unfair, deceptive, or abusive. Compliance and repurchase risk still exist at every step of completing a digital application, from submitting the application to processing, underwriting, closing and secondary-marketing.  Compliance penalties and buyback demands aren’t going away any time soon, no matter how advanced technology becomes. That’s why, as digital technology is evaluated and implemented, chief compliance officers (CCOs) must have a seat at the table to ensure current compliance and proactively prepare for future compliance changes.

While many tech providers oversimplify by labeling their solutions “plug and play,” that’s rarely the case. The approach to evaluating new industry tools – and the companies offering them – should change with the CCO at the table to address current processes in light of going digital. Some hard questions to ask include:

  • How are entry-point applicant data and the application workflow handled differently in a virtual world versus a traditional mortgage process?
  • How can digital technology capture high-quality, verifiable data earlier in the workflow to help eliminate back end data-quality issues?
  • How can digital technology protect against UDAAP, TRID and Fair Lending violations?
  • How can digital technology truly improve portfolio- and investor performance expectations and reduce buyback risk?

Addressing these hard questions requires lenders to think about how they invest in digital and cloud-based solutions.  For starters:

  1. Validate that the provider has a compliance-driven culture.
  • Organizational values rooted in compliance
  • Compliance-minded personnel throughout the organization and a willingness to partner with client compliance groups
  • An independent compliance group providing business oversight into technology programs and maintenance
  1. Ensure the provider’s technology is adaptable.
  • Technology that integrates into or enhances your existing compliance processes
  • Flexible and scalable solutions driving efficiency and data quality
  • Technology that easily adapts to business and regulatory changes
  1. Press for data-rich solutions.
  • A high-quality data foundation featuring ongoing validation and transparency
  • Atomic data capture featuring complete, accurate and audit-ready data
  • Data mining and reporting flexibility and implementation expertise
  1. Evaluate both the provider’s cloud and end-point security design.
  • A strategy for included security features or supplemental services to bolster cloud data protection
  • Constant monitoring of all traffic, user engagement and file movement with auditable event logs
  • A well-defined provider Business Continuity Plan (BCP) that complements your BCP
  1. And finally, assess whether the provider has genuine and deep mortgage expertise to understand and deliver the meticulous detail of the mortgage process.  Does your vendor prioritize a true partnership to solve your business problems, or are they merely focused on closing the deal?

If executed correctly and with viable partners, cloud-based and digital technology can be used to enhance the residential lending experience for all participants while creating more-compliant lending processes.  These considerations will help you select the right tech vendor to support your success.

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