The sheer volume of audit requests coupled with the varying requirements regionally and the evolution of those requirements mean that pain points for compliance officers boil down to the ease of control and reporting.
Controlling compliance related issues requires mortgage CRM software with the capability to create an approved content strategy and controls for which tools loan officers and their marketing counterparts are deploying. Key to this control is the ability to bring multi-channel marketing communication under a single mortgage compliance umbrella within the CRM. Control also requires complex hierarchical relationships for permissions ranging from loan officers, to branches (and their DBAs) as well as the corporate entity and its subsidiaries.
Mortgage CRM systems often rely on the marketing team to produce compliance reporting, but modern CRMs like Surefire allow the compliance officer specialized access to do so on demand. Compliance needs to easily report on content used in marketing campaigns including those based on one or more of email, text messages, recorded messages, phone calls, as well as print marketing. Depending on the organization, the compliance officer may prefer to use professional service offerings from the host of their mortgage CRM to produce these reports.
Compliance officers are faced with a bevy of regulations to analyze. It amounts to an overwhelming alphabet soup that can force organizations into compliance paralysis. And it is completely understandable why.
- RESPA (Real Estate Settlement Procedures Act) – Prohibition of kickbacks for referrals of business and educating borrowers regarding settlement costs through disclosures about the loan transaction, value and cost-sharing.
- CAN-SPAM (Controlling the Assault of Non-Solicited Pornography And Marketing) – Requirement to provide consumers the right to opt-out of emails or from receiving commercial messages. Included in all emails from the CRM. Violations can easily top $1600 or more per email.
- DNC (Do not call) lists are hard to maintain – can import DNC if subscribed to the registry to better manage and mitigate complaints.
- TCPA (Telephone Consumer Protection Act) addresses telemarketing, restricts the use of automatic dialers or artificial prerecorded voice messages. regulates telemarketing calls, auto-dialed calls, pre recorded calls, text messages, and unsolicited faxes.
- CCPA (California Consumer Privacy Act) specific to California residents, gives them the right knowhow what services have information about them and be able to see what data companies have gathered about them, have that data deleted, and opt out of those companies selling it to third parties.
- Truth in lending enforced through Reg Z (gives borrowers the right to cancel certain credit transactions, including a lien on a borrower’s dwelling, to regulate some credit card practices, and to provide consumers with access to fair and timely credit billing disputes.) / Reg N (regulates how mortgage lenders, servicers, brokers, advertising agencies and others can advertise mortgage services. The rule forbids deceptive claims in mortgage advertising and other commercial communications sent to consumers by mortgage brokers, lenders, services, and advertising agencies. Mortgage lenders and advertisers found to be in violation of Regulation N can face civil penalties.)
- Reg B. Equal Credit Opportunity Act (intended to prevent applicants from being discriminated against in any aspect of a credit transaction. Regulation B outlines the rules that lenders must adhere to when obtaining and processing credit information. Lenders are prohibited from discriminating on the basis of age, gender, ethnicity, nationality, or marital status. Reg B mandates that lenders provide oral or written notice of rejection to failed applicants within 30 days of receiving their completed application.)
- NOIA (Notice of incomplete application) The NOIA is used if the application is missing information that the applicant can provide and can stop the Reg B clock.
- Changes to 1003 are coming, URLA, Universal Residential Loan Application.
Every mortgage lender is subject to audit, both annually and without warning. During this process lenders will need to produce documentation for every social post, flyer, email, text blast, etc. during a set period requested by the auditor.
During an audit, the auditor is trying to determine whether or not any violations occurred. For example, was there a trigger term used in a social post which did not include a disclosure made accessible to the prospective borrower. If a violation is found the lender could be subject to a fines or a complete lockdown.
Lenders are required to retain records of all customer marketing communications which can include text messages, emails, social posts, etc.
To demonstrate compliance in the event of an audit, lenders must keep track of what materials were sent to whom, when they were sent and who reviewed and approved them.
For materials co-branded with a referral partner, lenders must demonstrate that each co-marketing party has shared fair market value in accordance with RESPA. And in some instances, such as text message marketing, lenders must document that consumers expressly opted in to receiving communications.
Disclosures are required in any marketing materials which use a word or phrase that advertises the terms of a credit agreement. The Federal Trade Commission (FTC) defines these words or phrases as “Triggering Terms.”
The purpose of Triggering Terms is to clarify the terms of a loan providing consumers with the opportunity to compare offers from different lenders.
Examples of triggering terms include:
- The amount of a finance charge
- The title time required to pay and period of repayment
- The number of payments
- The amount of a down payment expressed as a percentage or a dollar amount
- The rate of interest charged by the lender.
Adding to the challenge for compliance officers is keeping track of the technology tools used by Loan Officers. Changes to regulations can introduce risk. Lenders usually respond to regulation by ratcheting down what they’ll allow loan originators to do, but that approach has been known to backfire. Rules intended to reign in employees can exacerbate the same risks they are intended to prevent.
Lockdown can cause top producers to leave or use unsanctioned tools because the approved tools are so limited. This can expose the lender to fines but the pressure to keep these high performers is high in a competitive labor market. A CRM with a well-designed approval management function allows organizations to assert control where necessary while offering leeway to the qualified, trustworthy individuals who deserve it.