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Mitigating Compliance Risks in the Mortgage Industry

By Rhonda McGill
August 31, 2022
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Each quarter, PerformLine hosts a regulatory compliance roundtable for the mortgage industry that gathers mortgage professionals to have open and productive conversations about the challenges they’re facing in the regulatory environment and best practices for ensuring compliance and consumer protection.

I always love hosting these roundtables—but this time, I was joined by Bob Niemi, Senior Advisor at Bradley, to help lead the discussion, which covered topics like internal compliance risks, working remotely, and social media. Below is a recap of the discussion from our most recent event.

Loan Officer Oversight is a Top Compliance Risk 

71% of mortgage professionals said internal compliance risks are a key challenge for their organization. 

Specifically, the challenges that attendees discussed were around the competition for business between loan officers due to a decrease in demand from rising interest rates. No matter how many protocols you have in place, said one attendee, you can only do so much and the loan officers are more than likely to do their own thing.

As loan officers now have more time on their hands, they’re spending more time on social media. In this case, social media should be treated like an advertisement—posts must be monitored and retained. This is especially important when there are any instances of potential compliance issues, such as using terms that could potentially mislead consumers (like “the best,” “the lowest rate,” etc.).

The challenge with this is staying on top of the workload with staffing constraints. Even if production is down, compliance teams are still running at a million miles a minute. 

Mortgage Compliance Risks While Working Remotely

We asked attendees how their teams are working now. 42% said that they’re still working remotely, 54% said that they’re on a hybrid schedule, and only 4% said that they’re fully back in-office.

Mortgage Regulatory Exams

After attending the American Association of Residential Mortgage Regulators (AARMR) conference, Bob said that exams are still happening, but regulators have pivoted a bit to focus on remote working policies and oversight of employees

States are also offering remote exams instead of in-person ones. So far, Bob says, there have been minimal issues and most organizations have been following good remote work policies and procedures.

Getting State Approvals for Remote Work

Bob was closely involved in getting state approvals for remote work during the pandemic. As of today, there are only four states who haven’t approved remote work and require all origination activity to be performed from a licensed branch location—Mississippi, Nebraska, Nevada, and West Virginia.

He talked about his support for remote work even before the pandemic. It helps protect the consumer and get things done as needed, preventing the challenges of having to be in an approved location, he says.

For more detailed information on remote work policies by state, visit the MBA website.

Compliance with Data Security and Privacy

One attendee asked: given the CFPB’s recent circular on data protection and security, should data security be of greater concern as it relates to remote work? 

There are a few basic principles to avoid regulatory scrutiny when working remotely:

  • Don’t hold any personal interaction within a home location
  • Don’t maintain any sensitive or personal records in a home location
  • When holding meetings in a public location (such as a coffee shop, etc.), be cautious about what information you’re discussing and sharing

The bottom line here is to make sure that you have policies and procedures for compliance in place! You are responsible for your loan officers, what they do, and that they know the rules.

Collaboration Between State Regulators

Bob quickly talked about the use of the State Examination System (SES) and how examiners are starting to accept exams from other states. If an organization’s exams are good, then this is a positive thing, but if there were findings in another state’s exam, then that could impact the current state’s exam.

Bob also reminded attendees that state examiners get on the phone once a month to collaborate and discuss the compliance challenges and trends that they’ve been seeing in the mortgage industry.

Social Media Compliance for Mortgage Loan Officers

As always, social media compliance was a hot topic of discussion for this roundtable. One attendee specifically called out how difficult it can be to manage compliance on social media, especially given the limitations of the platform(s) for proper disclosures, information, links, etc. The other challenge with social media is the sheer volume of content being produced. Another attendee shared that the regulators were surprised at the magnitude of information that their company sent for an audit from social media alone.

The general consensus was that most attendees agreed that social media is and will continue to be a challenge for compliance and that they’re still working on polishing up their procedures. 

Best practices for social media compliance for loan officers are:

  • To provide guidelines on what loan officers can and can’t say on social media and establish procedures to have content approved by compliance and/or marketing before sharing
  • Have ongoing monitoring of loan officers across social media platforms to ensure they’re following provided guidelines 

Join PerformLine’s Next Roundtable

Our regulatory compliance roundtables are designed to inspire discussion around the latest topics in the industry and to allow for collaboration through experience sharing. When you come to the roundtable, all we ask is that you turn your camera on and be prepared to participate in the discussion.  

Be a part of PerformLine’s next mortgage industry compliance roundtable—check out our upcoming events.

Tags: Mortgage