In the mortgage servicing world, it’s not enough to be familiar with regulatory compliance requirements. There must be a thorough understanding of the laws, regulations, and consumer impacts that dictate how loans are to be managed and serviced. Technology, process, and procedures need to be in place to confirm controls are proactive, risk is mitigated, and the response to ever-changing regulations can be managed. Regulatory compliance must be maintained throughout the loan life cycle. This includes delivering the right communication at the right time and place within the mortgage loan servicing journey. There must be complete competency in acting on those regulatory requirements regarding a subservicer’s workflows and procedures.
We know that our clients rely on us to make the process both easy and efficient for them and their homeowners, and having an effective compliance and risk management system is a key differentiator for our company. We achieve this by receiving constant feedback from our compliance team through quality control. And we test the output of our clients’ systems involving compliance requirements, note exceptions, and determine what corrective action or actions may be required, including a root cause analysis.
Our industry sees changes in regulations nearly every day. To ensure we never miss a beat, we have a 30-member team dedicated to regulatory compliance, managing the process from monitoring changes to final quality control. Intermediate steps include adjusting workflows, updating and providing training, and testing and auditing our compliance monthly.
The Components of Active Compliance Management
After we have ensured that we are fully aware of any regulatory compliance changes affecting a loan servicer and our compliance processes and documentation are up to date, it is time to implement the changes. It all begins with training. Every team member at LoanCare is trained on the compliance requirements relevant to the effective performance of their role and responsibilities. This job-specific compliance training, as opposed to broader, less specific compliance training that is not pertinent to individual roles, is far more effective.
But beyond internal, role-specific compliance training, other control mechanisms go into a subservicer’s proper administration of risk and regulatory requirements, such as communication protocols and process management. These things are just as important as training when ensuring a servicing operation is constantly operating in a compliant manner.
Quality Control Results in Positive Compliance Outcomes
We know our clients rely on the quality of our work. For this reason, everyone at LoanCare from front-line customer service team members to senior management, is focused on meeting your requirements. It is our commitment to you, and you can count on us to be up to date in all aspects of mortgage loan servicing-related regulatory compliance.
The frequency of regulatory changes makes it so important to stay on top of quality assurance. A necessary key to an effective compliance and risk management system is quality control (QC). It serves as a check and balance. It tests the armor.
Our approach is comprehensive; we review all the federal and state regulatory requirements as well as those under the agencies’ guidelines and include 25 to 30 areas of inquiry, such as bankruptcy and loss mitigation. In addition, our compliance team conducts a random sampling of loans that have gone through the particular process under review at that time and then ensures that everything attached to that process was handled in accordance with LoanCare’s existing policies and procedures as well as regulatory requirements.
Our QC team analyzes data, reviews processes, and provides departmental-level reports, passes and exceptions. These quality control functions are performed regularly for all regulatory requirements. Should any exceptions be identified, they are noted and communicated to the stakeholders within the impacted lines of business who then have an opportunity to either refute the exception and provide documentation supporting their refusal of the exception, or to agree to it and then mitigate that exception to the extent possible. They must also report the status of their mitigation efforts to the LoanCare board of managers each month and provide a trend analysis on each of the impacted areas to show if they are doing well in terms of “passing” over the last month and/or if trends or concerns are beginning to emerge within a particular area. Our system is a continuous improvement effort because compliance and risk management are very dynamic components of the mortgage loan servicing business.
LoanCare’s QC team handles new or revised regulations that require a significant organizational or operational change in conjunction with the legal department. The legal group is responsible for monitoring the regulatory landscape and alerting the QC team of any changes that may occur which would impact LoanCare as a subservicing company. Specific individuals on the QC team review those legal announcements, confirm if there would be an impact, identify the affected lines of businesses and stakeholders, and communicate the necessary change(s) to those individuals. LoanCare utilizes a Governance Risk and Compliance (GRC) tool to track those regulatory announcements and the interactions with those business lines and stakeholders to determine if there truly is an operational impact and if there is, what needs to be done to address the situation.
A Comprehensive Approach to Compliance
In the end, full compliance is a must. Our comprehensive approach of system enhancements; process controls; policies; procedures; training; updates to QC testing; engagement with our Quality Assurance team; communication with stakeholders; etc., and the tracking each of those components with the GRC tool until all have been successfully implemented, is what sets us apart.
Some of the nearly daily regulatory changes require significant organizational change, but oftentimes while important, dictate only minor tweaking to our tools and processes. High-risk regulatory changes are placed in a separate category and handled through a post-implementation validation process whereby in addition to the ongoing QC monitoring, we will conduct a targeted test on the regulation to ensure the effectiveness of its implementation plan. However, in all cases, whether large or small, every change is thoroughly evaluated, and any needed modifications are applied to our processes, compliance training, and testing.
Lenders seeking a subservicer truly competent in compliance and risk management should look for rigor and consistency in training, the measurements used, and the reporting methodologies that ensure continuous improvement. Seek out a partner like LoanCare – one who understands risk – and knows how to identify, measure, monitor, and mitigate it.