IN THE PAST, LENDERS WHO HAD TROUBLE FALLING ASLEEP could cure their insomnia by reaching for a thick regulatory document to thumb through. But today that approach would be more likely to produce nightmares. Someone picking up the Consumer Financial Protection Bureau's (CFPB's) Supervision and Examination Manual would come across an eye-opening list of 27 federal laws falling under its jurisdiction.
If that's not enough of a jolt, lenders can lay awake wondering if they're in compliance with the CFPB regulations released in January, which cover business practices ranging from underwriting to servicing.
It's no wonder mortgage lenders are concerned about the necessity of undergoing an on-site CFPB exam.
Executives wonder what an examiner will see when looking at their loan turndowns through the lens of fair lending laws. And how will employees respond when a CFPB examiner asks them to describe the company's policies regarding pricing exceptions? Many lenders also are unsure if they have the documentation an examiner will want to see in order to confirm they run their business in a compliant manner.
Last March, Palm Bay, Florida-based ISGN Corporation began performing mock audits to help lenders prepare for the time when CFPB looks into their operations, says Lisa Weaver, the company's senior vice president of mortgage solutions.
ISGN is a mortgage technology firm offering automation products ranging from a loan origination system (LOS) to default servicing. Closing services such as title insurance and appraisals also are provided by the firm.
"We touch 11 percent of the mortgages in the U.S.," Weaver states.
In December 2013, ISGN began offering its CFPB Compliance RiskCheck[TM] as an automated tool for simulating an actual regulatory audit. Both origination and servicing modules are provided with the RiskCheck system.
Community banks, credit unions and small to midsized mortgage firms "can't afford an onsite mock audit, but need help" to be ready for a CFPB exam, explains Weaver. Compliance RiskCheck presents more than 500 questions for lenders to answer about their mortgage business.
In addition to providing an intensive self-assessment, RiskCheck also offers "best practice" answers to those questions as examples for lenders. Documents used to back up a lender's policies and practices are available as well. Reports also are generated that evaluate a firm's compliance risks in different areas and offer "an action plan for improvement," says...