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As I work with lenders to solve for the alphabet soup of compliance, TRID and HMDA specifically, I consistently receive questions around the latest rumblings popping up in the news.
Recently I’ve been asked about tolerance violations related to the loan estimate (LE) and closing disclosure, as well as increased investor scrutiny on seller HMDA data. I addressed those questions with an engaged audience at The Mortgage Collaborative 2019 Winter Conference and now below.
Q: Are the technologies I currently use, really doing the job monitoring TRID tolerance and are they helping me reduce my costs?
A: In the news, there has been increasing talk about tolerance violations related to issues with the LE and CD. To understand technology effectiveness, Lenders need to evaluate their current TRID process by asking:
- Are your systems and technology performing the proper classification of LE and CD and correct versioning?
- Can I easily see a clear comparison of fees across multiple versions of the LE and CD?
- Is there a tight integration with 3rd party compliance and risk management platforms to help me perform a complete review?
- How many of my audit tasks are completed through rules-driven automation that focuses resources on exceptions?
- How frequently can I quality check TRID compliance given the bandwidth and resources I have?
With those answers in hand, lenders can explore available market capabilities and services against their own. Yes, it’s possible to get through a TRID review at an astonishing rate of 18 reviews per staff member each day, ultimately reducing cost while accurately monitoring fees. How do you solve that? Technology automation infused into each one of the above process assessment questions.
Q: How can I ensure the accuracy of my HMDA data, which is now not only of interest to regulators but also to investors?
A: To combat various types of risk, investors are asking sellers for more and more data. This has recently included HMDA data to monitor their own fair lending performance.
Unfortunately, it’s hard for many sellers to quickly supply this information because of manual stare and compare processes used to verify and validate HMDA data. Their practices are not only inefficient, but glossy eyes, repetition, and the post-lunch drag don’t result in the accuracy investors want to see.
A simple, automated worksheet, powered by a specific set of HMDA compliance rules, can focus auditors on the exceptions and alleviate the necessity to review every data point in every loan file. The result? Loan file reviews in under 5 minutes because 97% of HMDA tests can be performed without human intervention. This takes you from 100% file review to the single digit error rate that exists in most lender’s loans.
At LoanLogics we like to say, “Report with Purpose, Not for Purpose.” By eliminating inefficiency with automation, lenders have time to compile and analyze results of their HMDA reporting and make adjustments in their origination strategy to improve quality for themselves, investors and borrowers.
TRID and HMDA represent some unique challenges for lenders and expectations of quality from both regulators and investors. Now more than ever, lenders need automation to manage the industry’s massive data requirements and to solve these challenges.
With regtech innovations (a collection of tools and technologies that help organizations comply with regulations more efficiently while minimizing the use of human labor), like machine learning and sophisticated rules engines, the process of collecting, verifying and validating information can produce purified data. This can then power audit tests to avoid tolerance issues, identify data discrepancies and help lenders optimize human capital, all while raising stakeholder confidence. #tmcwinter2019
