Since the middle of 2007 in the wake of the mortgage meltdown and subsequent global credit crisis, both the American Association of Residential Mortgage Regulators (AARMR) and the Conference of State Bank Supervisors (CSBS) established the Model Examination Guidelines (MEGs) to help provide consistency and uniformity in the regulatory examination process for the residential mortgage industry. The guidelines called for the adoption of a technology solution that would help expedite examination process by verifying loans against numerous federal, state, and municipal laws and regulations such as anti-predatory lending, high-cost / high-price legislation, Truth-In-Lending Act (TILA), Real Estate Settlement Procedure Act (RESPA), Home Mortgage Disclosure Act (HMDA), and state consumer credit laws.

Following an eight-month evaluation process, ComplianceEase’s automated compliance system, ComplianceAnalyzer®, was selected as the electronic examination (e-Exam) system to be incorporated into the audit process. One of the primary goals of the MEGs set forth by CSBS and AARMR is to incorporate ComplianceAnalyzer and the suite of automated compliance software into examinations by banking and mortgage regulators from all 50 states and the District of Columbia. Instead of the traditional sampling methodology, examiners will transition to reviewing up to 100% of a licensee’s loan production and loan portfolio in the course of an examination.

The suite of automated compliance software including ComplianceAnalyzer®, RESPA Auditor™, HMDA Analyzer™, CRM Manager™, Examination Dashboard™, RegulatorConnect®, and RegulatorDirect® has been adopted as the state supervisory technology solution by the Multistate Mortgage Committee (MMC), a committee of 10 state mortgage regulators formed by AARMR and CSBS to coordinate state supervision of the largest mortgage companies in the state system. The cornerstone of the e-Exam initiative is the CSBS / AARMR Nationwide Cooperative Protocol and Agreement for Mortgage Supervision (Agreement) signed by all states plus Washington, D.C. and Puerto Rico which allows states to share supervisory information and coordinate uniform supervisory activity through the MMC. The Agreement works in tandem with the Nationwide Mortgage License System (NMLS) launched to restructure the mortgage licensing process. These inseparable duties of examination and licensing form the core responsibilities of mortgage supervision.

In order to prepare the industry for a technology-based e-Exam process, including the facilitating of the extraction of a licensee’s loan portfolio data from the loan origination and/or loan servicing systems, RegulatorConnect.org was developed by ComplianceEase to provide resources, tools and services to guide and assist licensees through the e-Exam process. In early 2010, ComplianceEase developed the industry e-Exam loan-level data standard called the Licensee Examination File™ (LEF), the LEF has been adopted by CSBS, AARMR, and the MMC. Mortgage and banking technology vendors are adopting to the LEF data format in order to facilitate their customers in the e-Exam process. The RegulatorConnect portal creates a mutually rewarding examination process for regulators and licensees, improving and increasing quality through better collaboration and technology.

The employment of modernized processes and uniform approaches to supervision will foster an environment of effective supervision while minimizing regulatory burden and expense for both the regulator and the industry.

Benefits for Mortgage Lenders / Brokers / Servicers

• Easier preparation for examinations
• More objective and uniform reviews
• Minimize costs associated with examinations
• Improve profitability through better asset quality

Benefits for Regulators

• Achieve uniformity and standardization of loan reviews
• Enhance efficiency and effectiveness of examinations
• Save time and “do more with less”
• Reduce travel and other expense

One-time Compilation and Configuration Process

In order to facilitate the use of advanced technology in the e-Exam process, loan portfolio information should be maintained in a format that allows electronic extraction of loan data from the system of record. Institutions following this expectation will benefit from a more streamlined and efficient e-Exam workflow. A simple one-time setup process through RegulatorConnect or RegulatorDirect to facilitate the data delivery of the loan-level information required by any state regulator in any jurisdiction. Subsequent e-Exams can leverage the initial setup, reducing the total time and cost of all future audits.

For loan origination systems and other systems that are certified by ComplianceEase as RegulatorConnect Certified Systems, export function within these systems is ready to be used to export LEF files.