In October, state regulators issued a press release on the Conference of State Bank Supervisors (CSBS) website to encourage mortgage lenders to integrate regulator developed data standards for exam data transfer into their mortgage loan origination systems. The press release was issued jointly with the American Association of Residential Mortgage Regulators (AARMR) with the purpose “to enhance the quality of loan review and examination processes while reducing regulatory burdens for industry.” This is a great goal, though a mortgage company undergoing any level of examination will certainly describe the process as lengthy and burdensome.
When state regulators join together to conduct a joint examination of a state-licensed mortgage company, they utilize the Multi-State Mortgage Committee (MMC) format. This, too, is stated to help “minimize regulatory burden and expense, and foster consistency, coordination, and communication.” MMC resources are available online at the CSBS website to help mortgage companies understand and prepare for state examinations. The Mortgage Exam Manual and Supplements page has the latest version of the MMC Manual, exam modules for Financial Condition, Compliance Management System, Mortgage Origination, and Mortgage Servicing. A visit to this webpage will gain insights and understanding into the exam criteria and process. Certainly, a must for every state-licensed mortgage company.
The examination request for loan files can be quite extensive as well as the data included in each file. When the loan data fields are not properly mapped from the source data within the origination systems being used by the lender, the export of approximately 200 data fields of information from each loan file to the Lending Examination Format (LEF) is dependent on the precise alignment of information to be transferred. When any portion of the mapping is off, the LEF format validation will notate formatting errors as part of the delivery process to the regulator, which can create even more work and, many times, expensive manual data input.
Both state and federal regulators use the same data standards or LEF in an effort for uniformity. Their purpose is to increase consistency in electronic exams and help lenders deliver cleanly mapped data for the review. In the remote portion of the examination, regulators require clean LEF data to test mortgage loan files for federal, state, and regulatory compliance. This process only functions when loan data fields align. The LEF integration into lender loan origination systems help ensure this success.
Thus, regulators are now offering their assistance to origination system vendors to help promote acceptance of LEF export capabilities. The goal is to reduce time and effort by embedding standards into origination systems and circumvent mapping errors. The regulators have had several meetings with industry and vendors and are encouraged by positive responses to date.
Once the notice of examination is sent and the request for loan files for each participating state is made, the clock starts running. This data is generally due within thirty days. The acceptance of embedded LEF data will benefit everyone, but only if completed in advance.
[JILL Emer1]Double check me on this sentence – I just want to make sure I do not change the context by removing ‘why’
