Regtech is helping financial institutions to improve operations, enhance risk mitigation, and manage compliance better and faster than it was previously possible with legacy tools. Additionally, today’s modern risk and compliance solutions are enabling the mortgage industry to meet the challenges expected in 2021 while preparing for growth this year and beyond.

The mortgage industry expects to confront a series of major regulatory changes due to the COVID-19 pandemic’s complexities, the recent avalanche of loans in this refinance market and new government leadership. Lenders should expect a greater focus on enforcement in 2021.

While the mortgage industry is currently experiencing a boom, this is an excellent time to also concentrate on technical advancements in risk and compliance. The process improvement opportunities afforded by lower origination volumes are felt across the mortgage ecosystem and are often manifested in a renewed emphasis on compliance and risk management.

Increasing Compliance Issues and Resulting Workloads

According to industry reports lenders were having less compliance and quality management problems at the start of 2020 compared to the previous time period. However, due to complications related to the pandemic, which necessitated social distancing, virtual adoption, remote workforces, and stay-at-home orders for many customers, these issues have resurfaced.

According to the 2020 Q3 ACES Quality Control Industry Trends Report, the error rate of 2.34 percent in the mortgage industry is up significantly from previous quarters and is the highest since the report’s inception in 2016.

New Risk and Compliance Challenged in 2020 and 2021

If the initiating lender is not vigilant, the flexibility granted as a solution to the pandemic, such as alternate verifications, can have the unintended effect of raising the probability of loan defects. Many conventional routine verifications have become riskier, if not impossible, in the face of the pandemic.

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Due to the inability to verify identity in person and other pandemic-related challenges, lenders are more vulnerable to possible fraud, as well as compliance and QC issues. Lenders are increasingly reliant on credit monitoring and risk reduction resources provided by trusted partners.

Lenders must be able to respond in real-time and make the required adjustments as risk perspectives evolve and perhaps improved enforcement regulations are implemented. Technology can be beneficial.

With so many lenders struggling to keep up with the risk and compliance workloads, any ability to boost workflow and productivity should be pursued by all lenders. These improvements enable lenders to concentrate their time and money on loans that are more likely to succeed.

Technology’s Critical Role in Enabling Organizational Growth

The mortgage industry can provide a better borrower experience by using technology that simplifies and streamlines the verification process, which helps them remain competitive. The less complex and time-consuming the process, the more satisfied the borrower would be. Customers equate the amount of time spent and the different hoops and challenges they had to leap through or over with whether or not they had a positive lending experience.

These are the kinds of questions that lenders can raise with their technology vendors. Since the mortgage world is evolving at such a rapid rate, they can no longer rely on plug-and-play solutions. Lenders should look for technology partners that are aligned with their digital priorities and who will continue to invest in their tools over time.

Rather than postponing necessary updates, lenders should seek out solutions that can scale with them. The right “partnered” approach will share the lender’s burden today while retaining the forward-thinking that is so important as the industry evolves in both traditional and atypical ways.

Focus on Risk and Compliance

As 360factors CEO Carl McCauley writes in the Scotsman Guide, businesses need to focus on risk and compliance. As the economy recovers from the pandemic, credit risk remains a top concern. To identify troubling patterns, smart lenders can set clear metrics to monitor in terms of both performance and risk. This will assist decision-makers in rapidly gaining a grasp of how to improve company processes and profitability.

This year, originators may want to know what important factors are being considered for the compliance domain. They’ll also want to hear about the methods that are used to keep mortgage firms safe when it comes to risk and compliance. New cloud-based regulatory technology systems, commonly referred to as Regtech, combined with advanced compliance solutions, can help navigate regulatory changes rapidly and effectively, bringing these activities up to date. Artificial intelligence technology may also assist in automating the process of determining what actions must be taken as laws change.

Interested in seeing what risk and compliance technology can do for the mortgage industry? Get in touch with our risk and compliance domain experts for a demonstration of the Regulatory Change Management Software.