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Managing Regulatory Compliance for a Mortgage Business


It’s all about data-readiness 

Let’s face it, if you are a mortgage lender or servicer, you would rather focus on growing your business than attending to the numerous regulatory reporting requests. But you are obligated to comply, and not doing so will land you in hot waters with agencies like the HUD’s Mortgage Review Board (MRB) or Consumer Financial Protection Bureau (CFPB), just to name a few. 

Here are takeaways from a SitusAMC report earlier this year (2021): 

  • Nearly two dozen FHA lenders faced sanctions for reporting errors in the last fiscal year. 

  • Some 70 percent of MRB sanctions last year were related to failure to report, or timely report, material events. 

  • Failure to report material events may affect annual recertifications. 

  • Lenders need to establish or refine internal controls to ensure material events are reported in a timely manner. 

The CFPB is also aggressively cracking down on mortgage servicers, by sending requests for data from companies to show how they handled forbearance applications. CFPB warned, “Unprepared is Unacceptable.”  

The examples above highlight the importance of having a data governance framework that can consolidate and streamline all your reporting requirements and be responsive enough to comply with sudden regulatory requests, all without being a burden to your core business. 

There are three elements that can help you stay on top of your reporting requirements without the need to increase your IT staff: 

  1. Single Source of Truth 

  2. Automated Data Quality Control 

  3. Organization-Wide Data Proficiency and Data Culture 


1. Single Source of Truth: 

Disparate data systems should be consolidated to remove friction while producing regulatory reports. This single-system model also reduces versioning issues because there is only one version of data instead of different ones within different departments. With a single system of records, all business use cases (not just regulatory reporting) can quickly pull accurate and consistent data. 

Then, there’s also the challenge of multiple mortgage data sources with varying data formats. You need to invest in a process to normalize the different data formats so that they can be stored in a single source of records. Standardizing data is essential to appropriately leverage mortgage servicing platforms that require a specific standard e.g. LOS, MSP, SBO.  

2. Early and Automated Data Quality Control: 

Reporting errors can be costly in terms of fines and reputation. Remember, the impact of bad data grows exponentially as it moves downstream – this is known as a the “1-10-100 rule” developed by Labovitz and Yu. Therefore it is imperative that you catch data issues early, in order to minimize the cost of fixing these issues. 

Data validation should also be automated. Automation cuts out human error and enables your mortgage business to be responsive to changing market conditions. With automation, you can scale data validation with your business growth instead of hiring and training more staff to manually validate data. When market conditions are not favorable and business slows, you avoid staff turnover. 

3. Organization-Wide Data Proficiency and Data Culture: 

Mortgage servicing is a data-driven business. In this business, data proficiency means having the capability to source data, validate and remediate data, manage and store data, and prepare data for use cases while utilizing appropriate processes and tools. 

In the traditional operating model, data requests fall on the IT department, which creates a risk of bottleneck and mis-understanding complex, business-specific data elements. Removing the reliance on IT and democratizing data will improve the responsiveness of your business to new regulatory requirements because your data users are also data owners. For these data users to be effective data owners, they must have a certain level of data proficiency. 


About BaseCap: 

BaseCap Analytics has helped many financial institutions prepare their data to comply with regulatory requirements and understand all the relevant pain points from IT bottlenecks to data and technology fragmentation.  

We have been involved in enhancing the data architecture, updating the operating model, and integrating appropriate technologies for our clients to achieve their current regulatory requirements as well as future data initiatives.  

Contact us for a demo of how our data Data Quality Manager, and team of data experts can help you manage your regulatory requirements as well as becoming a responsive data-driven company.