The constant onslaught of new regulations over the past six years has forced lenders to become more nimble when adapting to change and innovations. Compliance concerns are tightly linked to nearly every technology decision, whether related to documents, data integrity or reporting fair lending.
Embracing the changes needed to address the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act has become a critical imperative for lenders that want to remain in the business. Making the wrong choice when implementing a new technology platform can be as serious as letting older technology drive you out of compliance.
Traditionally, the changes federal regulators made to protect consumers have involved changes to the documentation the borrower receives during the mortgage lending process. The changes we saw with Consumer Financial Protection Bureau’s TILA/RESPA Integrated Disclosures (TRID) followed that pattern.
Even the CFPB’s eClosing pilot was about the paperwork, to some degree – getting disclosures and closing documents to the borrowers faster, so they have more time to review and understand them. These are the kinds of changes that drive lenders to investigate new, more powerful doc prep systems.
But what functionality is essential? What must your next doc prep provider be prepared to deliver? Here are three things you should demand from your document partner.
1. Fully Dynamic Documents
When automation first entered the mortgage industry, forms were typically created on x-y coordinate-based templates. There was no other way to automatically generate documents. While the templates worked great for compliance – when they were up-to-date – it was expensive and time consuming to keep up with every national, state and local document change.
Within the last decade, much of the industry has migrated to dynamic docs, which allow documents to expand and contract based on the content required while remaining in full compliance. Since 2004, Docutech has been leading this movement because of the many advantages dynamic docs offer all stakeholders.
First and foremost, document changes are easier to make and those changes are easier to track, which provides a tangible compliance benefit. For our customers, Docutech actually takes over the maintenance of their forms, ensuring that they are always in full compliance with all investor and regulatory requirements.
2. Superior Document Compliance
While dynamic documents provide greater ability to easily make changes, someone still has to ensure that those changes are fully compliant. Document maintenance (both for standard forms and the lender’s custom forms) should be part of the offering provided by a qualified doc prep partner.
This requires constant monitoring of changing laws and regulations and how they affect the entire document library. When a compliance change is made in one place, it often impacts many documents that are subject to the new rule. A dynamic solution will apply the change across all document types, making it a more responsive tool for lenders.
Depending on your provider, making these document changes for either a standard document or a custom form can take days, weeks or longer. But using dynamic documents and the industry’s best tools, it can be reduced to hours or at most a day or two. In today’s evolving lending environment, a system capable of constant monitoring and applying those changes is the only workable solution.
Additionally, your vendor should have a strong legal compliance team capable of actively monitoring all regulatory agencies for required changes, which underscores the importance of established, deep relationships with the GSEs, FHFA and the CFPB. The right vendor will have these connections and use them to proactively stay abreast of compliance changes that will ultimately affect the lender’s business.
3. Extensive Functionality
Lenders today are working in highly digital and virtual environments, and their vendors must be capable of keeping up. The right vendor should succeed at providing a set of features that meets all of the lender’s needs. Choosing a partner that is unable or unwilling to provide all the required functionality will inevitably create problems for the lender over the long term. At a minimum, the vendor must be capable of providing:
eSignatures, which is the future course for our industry;
Paper fulfillment, to guarantee TRID compliance;
eDelivery, because both borrowers and investors are now capable of receiving documents electronically;
A compelling (easy, convenient, fast) experience for the borrower;
High reliability, which must be demonstrated with past experience and customer testimonials; and
Data integrity rules, which are safeguards that prevent a user from generating a non-compliant document.
This is just a partial listing of the functionality that modern lenders need to be successful.
Ultimately, your document partner must be capable of delivering the functionality that allows you to operate profitably, be fully compliant and includes the technology that evolves with industry to the newest eMortgage standards. This is the direction the mortgage industry is headed, as evidenced by Fannie Mae spearheading the development of a decisioning support tool for lenders who are considering moving to an eMortgage or an eClosing workflow and require the support of a third-party vendor.