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e-Exam Background

Since the middle of 2007 in the wake of the mortgage industry 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 auditing loans against numerous federal, state, and municipal laws and regulations such as the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), Home Ownership and Equity Protection Act (HOEPA), Home Mortgage Disclosure Act (HMDA), Secure and Fair Enforcement for Mortgage Licensing Act (SAFE), and other state and local consumer credit laws.

Following an eight-month evaluation process, ComplianceEase’s automated compliance system, ComplianceAnalyzer® and other compliance tools from ComplianceEase's solution suite were 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®, TRID Monitor™, RESPA Auditor™, LicenseManager™, e-Exam Dashboard™, RegulatorConnect®, and RegulatorDirect® has been adopted as the state supervisory technology solution by the Multistate Mortgage Committee (MMC), a committee of state 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 (except Colorado) 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 Licensing 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, was developed by ComplianceEase to provide documentation, data format validation and electronic submission tools as well as optional professional services to guide and assist licensees through the e-Exam process. In early 2010, ComplianceEase worked with CSBS and AARMR to create the e-Exam loan-level standard called the Lending Examination Format™ (LEF™). The LEF has been adopted by state and federal banking and mortgage regulators and continues to be developed and enhanced. Mortgage and banking technology vendors have adopted the LEF data format in order to facilitate their mortgage lender customers' participation 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
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. Licensees will utilize RegulatorConnect to facilitate the loan-level data delivery required by any state regulator in any jurisdiction. Subsequent e-Exams can leverage the same specifications, reducing the total time and cost of all future audits.

Loan origination systems and other systems certified by ComplianceEase as a Certified RegulatorConnect System, provide export functionality allowing users to easily export LEF files.

ComplianceEase customers may also access the RegulatorDirect portal in ComplianceAnalyzer to directly deliver loan data to their regulators. RegulatorDirect removes the need to create or export LEF files from their system of record.

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