The advent of Mavent: an Irvine, California-based company is coming to the rescue of mortgage lenders everywhere that are struggling to comply with a mountain of new laws and regulations. Their solution is so effective, even Fannie Mae is using it.

Author:McGarity, Mary
Position:Cover Report: Fraud and Risk Management
 
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MAVEN: ma*ven or ma*vin; noun. A person who has special knowledge or experience; an expert. [??] In the world of loan compliance, that definition could apply to Irvine, California-based Mavent Inc., a provider of automated compliance services for the mortgage industry. [??] Mavent's name is a deliberate play on the Hebrew word "maven," says Tim Green, the company's founder and chief executive officer. "We basically manage what we refer to as an expert system [for mortgage compliance]," Green says. [??] Green, who also serves as chairman and director, laid the groundwork for Mavent in 1998, and the company was incorporated in February 2000. Today Mavent provides automated compliance services to several top-20 lenders, as well as to Fannie Mae. [??] The company's flagship product is the Mavent[R] Expert System, a rules-based engine that applies a model compliance decision-set to every loan in a client's pipeline or to entire pools of whole loans. The automated system submits loan data for reviews against nearly 300 legislative acts, 200 license types, and the rules and regulations of more than 60 regulatory authorities, according to the company. [??] Most of Mavent's lender clients are large and have multiple loan origination systems (LOSes), Green notes. "We typically connect to their LOS and take in loan data from all of their origination channels. We pull certain data elements from the systems at various points that are either status- or workflow-driven, and run a review," he says.

Mavent reviews 100 percent of its lender clients' loans, as opposed to a small sampling, he adds.

Green's experience in the legal, financial services and real estate fields led to his interest in automating compliance for mortgage companies. He holds a law degree from the University of Kentucky College of Law, Lexington, Kentucky. He's spent much of his 30-year career as the chief executive and chief operating officer of firms in the real estate and financial services industries.

Prior to starting Mavent, Green was senior vice president of operations in the real estate services division of Maryville, Tennessee-based Clayton Homes Inc., now a subsidiary of Omaha, Nebraska-based Berkshire Hathaway Inc. Green also served as president and chief operating officer of real estate investment company Clayton Williams and Sherwood Inc., Newport Beach, California. The company is now known as CWS Capital Partners LLC.

In his work within the real estate and finance fields, Green saw an obvious need for a more efficient approach to ensuring mortgage loans met all legal and regulatory requirements--a function performed manually by humans until fairly recently.

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"I don't know if there was any 'a-ha moment.' But over the years I saw more and more regulations for financial institutions pile up," he says.

Green was also influenced in the mid-1990s by Philip Howard's book, Death of Common Sense: How Law Is Suffocating America. "It's about the explosion of regulatory law in America. When I went to law school back in the 1970s, I had a couple of tax courses and administrative law courses. But there weren't all these mounds and mounds of regulation you have today," he says.

As the regulation of financial institutions became more complex in the 1980s and 1990s, Green watched a parallel explosion in computerization and automation, he says.

Automating the compliance review of mortgage loans seemed like a logical step. "I would visit mortgage operations and see spreadsheets or charts on the walls. Across the top would be a list of states, and then down the side would be the fees that you could charge for a loan in each state. People were using these little spreadsheets or matrices to figure out what was appropriate to charge in each jurisdiction," Green says.

"That kind of turned on a light in my head--that's the type of process that can clearly benefit from computerization," he says. Green began by working to build a database of legal rules.

In 2001, Mavent signed its first customer, Novato, California-based GreenPoint Mortgage Funding Inc., and built a system that reviewed 100 percent of GreenPoint's originations. "Since that system went up in 2002, [GreenPoint] has originated close to three-quarters of a million loans. They've not received one back with a compliance issue," Green says. "It shows you what the ROI [return on investment] is," he says.

Signing GreenPoint Mortgage as a client allowed Mavent to take its concept to the capital markets and raise money there, Green says. In 2003, San Francisco-based Financial Technology (FT) Ventures was Mavent's first institutional investor. "We've done two rounds of investment with them," he says.

Mavent now boasts more than 20 clients, including Cleveland-based National City Corporation; San Jose, California-based First Franklin Financial Corporation; Cleveland-based Ohio Savings Bank FSB; West Palm Beach, Florida-based Ocwen Financial Corporation; Charlotte, North Carolina-based Lending Tree LLC; and New York-based Credit Suisse First Boston. Mavent signed Fannie Mae, its biggest client to date, in October 2005.

Mavent's clients range in size, but the company typically focuses on institutions originating $30 billion or more a year, Green says.

No spilled coffee on the files

Today Mavent's automated system reviews a loan file in two to three seconds, Green says. He estimates it would take an attorney specializing in financial services regulation roughly an hour and a half to review the same file. "That's if the loan were in a jurisdiction with which the attorney was familiar with and if it were a product with which he was familiar. An attorney could probably do five or six loan files a day without going crazy," Green says.

Automating the review of loans also ensures consistency, which isn't always the case with manual reviews, Green adds. "We don't have to worry about spilling coffee on that loan file. We don't have to worry about a distracting phone call. We don't have to worry about mixing up a 10 with a 01," he says.

The company has grown from a handful of employees to 60 people today at its Irvine headquarters. They include nine attorneys, most of whom work on maintaining Mavent's database and rule set, says Green.

The company also maintains a network of outside attorneys and law firms to keep abreast of current laws around the country. These include Linthicum, Maryland-based Hudson Cook LLP and Pittsburgh-based Reed Smith. "We have a large network of firms, both national and local, who supply us [with] data regularly so we can keep our rule set current," Green says.

The explosion of regulations in the mortgage business has been a boon to Mavent, Green notes. "When we started to build our initial proof-of-concept site, the state of North Carolina hadn't passed the very first state high-cost [lending] law yet. Now there are more than 30 states with high-cost laws and numerous municipal laws. So [lending regulation] has not only gotten complex, it's gotten painfully complex," he says.

A giant legal brain

Crucial to Mavent's success is the extensive data warehouse it maintains on financial regulations and laws.

Lynette Hotchkiss, senior vice president and senior legal counsel, heads a team of seven attorneys that maintains and updates the database. Prior to joining Mavent in late 2002, Hotchkiss practiced business law for various real estate and lending firms, including stints as legal compliance expert and counsel at Portland, Oregon-based CFI ProServices Inc., and law firms Hudson Cook and Reed Smith.

Mavent has built a database for mortgage regulation and compliance unmatched by any other company, according to Hotchkiss. "We take the minds of the best consumer...

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