Why your regulatory risk management strategy could be missing the mark

The regulatory risk management process can be a minefield for the best of industries, however one area that can be more of a minefield than most is in the mortgage lending space.

In a recent post by RegTech firm Ascent, the company outlined how the process is challenging to mortgage lenders and becoming ever more so as demand for mortgages climbs and firms expand into new areas.

A big change event that has driven alterations to the way companies operate has been the pandemic. As stated by Ascent, many companies scrambled to adopt digital workflows and capabilities largely overnight – with regulatory changes governing those new operations quickly and changing just as quickly.

According to Ascent, depending on where they operate, mortgage lenders need to look at the regulation feeds from multiple states – and with many states changing their licensing requirements regularly, it can be tough to stay on top of all the latest updates, alongside trying to manage federal regulatory requirements and changing consumer protection rules.

Ascent said that mortgage lenders turn to industry-familiar search tools to help them determine what they should be doing from a compliance perspective. The company said that to actually determine what they should be doing, mortgage lenders need to read through the entire text, subjectively decide which requirements are relevant to them and record those requirements for implementation.

Ascent said, “Within these lengthy legislative bills and regulatory updates, there are the regulatory requirements—the prescriptive “to-dos” which get to the heart of what mortgage lenders need to do to stay compliant. But there’s also important supporting information in these texts—exemptions, clarification statements, and definitions that are further needed to interpret the requirement.

“Unfortunately for mortgage lenders, this supporting information is typically not found directly next to its corresponding requirement. Users have to dig through different sections of the document, which wastes more time and creates even more uncertainty around what they need to do.”

Read the full post here.

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