Attaining Compliance… and Proving It
Author: Kevin R. Schlumpf
Thanks to the Consumer Financial Protection Bureau (CFPB) and a constantly evolving regulatory environment, today’s mortgage servicers find themselves with an immediate need to not only ensure compliance, but to explicitly prove it as well. The consequences of non-compliance are high: fines, punitive damages and even personal accountability for executives.
Proving compliance is hard enough now, with many organizations relying on manual processes to piece together information from disparate systems. But new regulations have made matters even worse. Written quite broadly, some of these regulations are open to interpretation, which will lead to process and performance variability across the industry. We can also assume that the regulations will be altered over time, making it even more troublesome to track and maintain compliance. Today’s piecemeal approaches to compliance – which produce a historical view, at best – are likely to fall short of expected CFPB audit processes.
An effective solution requires an entire rethinking of how your organization captures regulatory events and makes them available throughout the servicing process. Continuing to cobble together data from multiple systems misses the mark, because this approach lacks important context. Proving compliance is all about demonstrating the ability to marry timelines and events into a discernible form. To accomplish this, it’s imperative that banks now consider an automated approach.
Automation for the sake of automation won’t cut it. Event tracking, data state management, data transformation and compliance dashboards should be key elements – something record-centric systems just cannot deliver.
If you think about it, proving compliance requires the same solutions as managing to compliance on a daily basis. With that realization, it’s not a stretch to extend your loan default management systems into compliance enablement solutions.
Over the course of 10 years, for example, we’ve had to continually evolve the DXC EarlyResolution default management system to help mortgage servicers keep pace with the industry – including keeping up with regulations. With such a foundation already in place, we were able to leverage the EarlyResolution business rules and data transformation engine – and incorporate 15 key metrics that are important to measure and track under Regulation X. The result is a standalone EarlyResolution Compliance system that allows lenders to take advantage of these automated best practices, whether or not they’re using any other DXC technology. If you’re currently using a loan default system, does your technology provider have a plan to help you gain CFPB compliance quickly? It’s worth asking.
The use of automation can not only help you maintain and prove compliance, but the appropriate system can also allow you to be more proactive. You can aggregate, control and centrally track all compliance-related metrics, allowing you to monitor trends and problem areas, then identify gaps and take action quickly. You can gain access not only to historical data, but also to intraday data. This allows you to respond quickly to auditors, management and customers, while also improving daily managerial oversight.
For organizations currently using manual processes, the journey to automation is not as long – or as arduous – as you might think. Finding an as-a-service provider can help you gain “out of the box” functionality that will allow you to begin tracking and reporting to new compliance rules within a matter of weeks.