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Special Reports
Document Services
Making Sure Docs Are in Line with Laws
By Jennifer Harmon
MCLEAN, VA -- The most common reason for investor repurchase requests is noncompliance
with federal, state or local high-cost anti-predatory lending laws, according to Christine Kirby, president of
Mortgage Banking Systems here, a provider of mortgage closing document services and technology.
In order to help lenders mitigate the risks involved with these laws, the company
has added ComplianceAnalyzer from ComplianceEase, which provides intelligent business solutions to the financial
services industry, to its ProClose platform.
"Mortgage originators that sell into the secondary market must take every
precaution to minimize costly repurchases," said Ms. Kirby. "The overwhelming rise of state and local
lending legislation has rendered obsolete the traditional, manual processes of auditing loans by hand or by using
simple spreadsheet applications."
The addition of ComplianceAnalyzer means ProClose now delivers one-click, seamless
access to industry-leading compliance analysis technology, along with detailed compliance reporting capabilities
- automatically integrated within the document closing process.
ComplianceAnalyzer organizes results of compliance reviews into one easy-to-understand
report, delivered through the ProClose document preparation system. The report provides threshold and variance
analysis as well as individual itemizations of points-and-fees tests. With a single click, users can access a complete
trail of compliance reviews across all applicable legislation. When potential violations or exceptions are detected,
the system provides narrative explanations. The reports easily reference reasoning, calculations, citations and
text of relevant legislation in plain English.
After being in the business for 20 years, Ms. Kirby said that although technology
has changed as the market has grown, the customer's desire and need to have a customized system remains strong.
"No two lenders do business the same way. You take out a loan and sell it to investors. You need accurate
documents. The number of forms you have to produce in order to remain compliant has grown, not decreased,"
she said.
"Our highest concentration is on the East Coast, but we service all 50 states.
The content of the document is what has gotten so complicated. For instance, there is a different set of docs in
New Jersey from the Fannie Mae version. Every time a new law springs up, we have our compliance department find
out what is needed to protect you. The value we provide is that we track all of it."
Fidelity and Trust Mortgage Inc., a nationwide mortgage lender, is an active user
of the system. "We chose this software because it provided a Genesis upload and it is Web-based. This allows
us to use the product without an interface. Also, it is simple to use, which makes our users happy," said
Daniel Macy, quality-control manager at Fidelity and Trust. "With new anti-predatory lending regulations being
passed every day, we need a robust solution to keep us in compliance."
Nationwide expansion of anti-predatory laws has required that mortgage originators
maintain robust, transaction-level compliance auditing as well as efficient and accurate closing documents.
ComplianceAnalyzer utilizes advanced natural language processing and rules-based
decisioning to produce a single, high-detail loan-level audit report that analyzes a loan's compliance with all
applicable federal, state and local regulatory compliance requirements.
David Girling, executive vice president for ComplianceEase, said, "ProClose
users can now take greater control of their mortgage auditing process, mitigate compliance risks and prepare loans
for sale into the secondary markets."
As of the end of 2004, there were 33 states and municipal districts with high-cost
lending laws, in addition to existing federal laws and other state regulations. Many of the state high-cost laws
incorporate assignee liability relating to damages and fines associated with noncompliance. The issue of assignee
liability has dramatically raised the stakes for investors, forcing the investment and credit rating community
to encourage the use of automated compliance. Fitch Ratings has asserted that "an originator's use of a technology-based
filter in the compliance process is viewed positively by Fitch. In fact, Fitch cannot provide credit for the compliance
process without it."
More and more lenders are asking questions when looking for doc preparation, according
to Ms. Kirby, because they want to make sure the consumer's identity is protected. "Outside of the predatory
lending laws, there is technical compliance under [Gramm-Leach-Bliley], which is changing the landscape of the
technology environment," she said.
"Under the FACT Act, lenders want to make sure borrowers' information is
secure and someone can't intercept someone's identity. The bottom line and result is to protect the consumer.
"There's a lot at stake. We are aware we affect thousands of people's lives
every day - from the consumer up through the lender, and all employees who are in business with the lender. Billions
of dollars of volume go through our system."
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