For mortgage lenders, constantly changing laws and regulations can make staying current with compliance requirements time-consuming and costly. It takes a collaborative effort to stay on top of it all, and everyone within your organization plays a crucial role.

Today’s regulatory landscape spans a broad and evolving set of federal agencies, state regulators, and GSE requirements — and the rules governing mortgage lending continue to change across all of them. Whether you’re building your compliance management system for the first time or strengthening an existing one, the eight components below provide a durable framework for managing compliance risk as requirements shift.

Building and maintaining a robust compliance management system for your lending operation

A compliance management system is the framework by which lenders manage their compliance risks and responsibilities across their organization. An effective system consists of many pieces that need to align and work together to help your lending organization meet all the necessary requirements. Regularly reviewing and strengthening each of the components below is what keeps a compliance program resilient as the regulatory environment continues to evolve.

Create a risk assessment program

Start by identifying the compliance risks that apply to your business. Then, evaluate any procedures or other controls that manage these risks and the strength of those controls. Where there may be gaps or weaknesses in the ability to control a risk, focus on adding or strengthening controls to manage compliance risks more effectively.

Risk assessments should be refreshed regularly to reflect changes across all oversight bodies. The mortgage compliance landscape includes active rulemaking and enforcement from federal agencies, state attorneys general, state financial regulators, and GSE seller/servicer requirements. A current risk assessment should also incorporate technology-related compliance risks, including the use of artificial intelligence in processing, underwriting, pricing, fraud detection, and where fair lending and model governance obligations apply.

Document policies and procedures

Establish and maintain detailed compliance policies and procedures that clearly communicate compliance requirements and responsibilities to employees for managing compliance risks.

Policy libraries require ongoing maintenance as rules change across multiple fronts simultaneously. This includes keeping pace with new and amended federal and state laws, updated regulatory thresholds and guidance, and GSE seller/servicer requirements, as well as emerging risk areas such as artificial intelligence, data privacy, and information security, where compliance expectations continue to evolve. Policies in these areas should clearly assign responsibilities, reflect current requirements, and be reviewed regularly to remain accurate and effective.

Conduct compliance monitoring and testing

Establish a scope, frequency and schedule for monitoring and testing based on your risk assessment results. If corrective action plans become necessary, measure and evaluate the results to ensure you’re seeing the necessary improvements.

As enforcement patterns shift across federal agencies and states, the scope of monitoring should expand accordingly. Internal monitoring programs should not be calibrated solely to the exam cycle of any one regulator. Federal and state regulators, GSE counterparty reviews, and private litigation each present independent compliance exposure and should be included in your monitoring scope as well.

Establish regular reporting and communication

Set expectations for reporting requirements and a communications plan for when compliance updates will be shared with employees, senior management and the board. It is also important to establish a communications protocol that will escalate any regulatory compliance issues and share critical messaging.

Given the pace of regulatory change across multiple agencies and jurisdictions, reporting to the board and senior management should include a standing update on the regulatory environment. This update should cover not only examination activity but also rulemaking developments, enforcement trends, and material changes at the federal and state level.

Host compliance training

Build and maintain compliance training programs based on role, line of business, conduct and more.

Training programs should be updated to reflect the current regulatory environment, including new requirements that affect day-to-day workflows. Role-based training should ensure that staff in product, technology, and operations roles understand compliance implications where their work intersects with regulatory requirements.

Leverage compliance technology

Technology is invaluable to helping lenders manage compliance risk. When evaluating a solution, first define your business requirements and look for platforms that can help you use automation wherever possible.

Coordinate with regulators

Set a protocol for how to engage with regulators, including building standard processes to receive and respond to inquiries, track examination findings and identify stakeholders to engage during regulatory discussions. Engagement processes should also account for GSE counterparty requirements, which are enforced independently of federal agency supervisory cycles.

Maintain oversight

Establish clear roles and responsibilities when it comes to compliance and maintain governance through the board and senior management. As compliance responsibilities have expanded to include technology governance, board and senior management oversight should reflect that scope. Where AI or machine learning tools are used in lending decisions, institutions should establish defined accountability for model governance, including cross-functional oversight that integrates compliance, legal, risk management and technology teams.

Proven origination solutions to support your compliance management system

As laws, rules and regulations increase in complexity, the processes and systems mortgage lenders rely upon to manage them also need to evolve. At ICE, we’re dedicated to helping our customers use the tools and automation necessary to meet their compliance needs. With decades of expertise and service to lenders, our solutions are designed to improve loan quality across the entire lending workflow. We employ and regularly consult with compliance, legal and industry experts to build automated compliance solutions that make it easier for our customers to keep up with the evolving regulatory environment. Our comprehensive suite of industry-leading, built-in compliance solutions include:

Encompass® and Encompass Compliance Service™

Encompass, the industry’s most complete end-to-end mortgage lending platform, does the heavy lifting to enable you to build and maintain a compliant workflow. With hundreds of state and federal laws and regulations, our Encompass Compliance Service allows you to feel confident that you're identifying and meeting the necessary requirements. Plus, you’ll be able to immediately make changes to improve loan quality and reduce the risk of mortgage buybacks by running automated compliance checks for regulations such as KBYO, ATR/QM, HOEPA, HMDA, TILA, NMLS licensing and more.

Encompass Docs Solutions™

Available within Encompass, our Document Solutions offer a single source to find state and federal mortgage documents within your LOS, so you have access to quality, compliant documents for every loan.

AllRegs®

Our AllRegs platform allows you to access accurate and up-to-date compliance and regulatory information to deliver better quality loans and avoid errors that cost you both time and money. The AllRegs platform is also accessible through Encompass.

Preparing for what’s on the horizon for mortgage compliance

Now is a great time to evaluate the compliance capabilities within your LOS and what your technology partner has planned for the future. In an ever-changing regulatory landscape, your LOS provider should be continuously monitoring upcoming requirements across federal agencies, state regulators, and GSE guidelines—and helping you implement necessary changes without disruption to your business. We also encourage you to examine the built-in compliance capabilities within your LOS, because these can do more than help you reduce risk. They also save you time and money. According to a MarketWise study, lenders who use automated compliance testing within their workflow save an average of 20 minutes and $14 per loan—savings that compound as the volume and complexity of regulatory requirements continues to grow. A technology partner that keeps pace with that complexity is one of the most valuable assets in your compliance program. Learn more about how Encompass can help you confidently navigate compliance requirements and make a return on your investment for many loans to come.