Author:
Partha Pratim Dutta
VP Operations of Nexval
Regulatory compliance is one of the key business problems that the mortgage industry faces recurrently. Before the pandemic, “security and compliance” was 1 of the top 5 challenges that contemporary businesses went through during modernization, and now – due to COVID-related regulatory measures and economic reforms – the compliance burden is increasing. Mortgage providers need powerful regulatory compliance software and audit management tools to keep up with the ever-changing market.
What is an Audit Management Tool?
An audit management tool is defined as a set of software, systems, and processes (usually automated, at least partially) that help financial service providers implement audit directions, which could include planning for the audit, gathering and analyzing data for compliance, helping different stakeholders collaborate on the evidence that’s collected, and then generate reports.
Audit management tools in mortgage and other sectors are a subset of regulatory technology or Regtech, which encompasses software solutions that aid in compliance. Risk management platforms are another such tool that helps preemptively in staying compliant and preparing for audits through proactive risk assessment and mitigation efforts. In the mortgage industry, audit management tools ensure that loans are compliant at pre-funding, post-closure, and mortgage servicing stages.
Read More: Is Shadow IT Affecting Mortgage Compliance?
What is the Role of Audit Management Tools in Mortgage?
Audit management tools in mortgage essentially have two roles – internal risk management and external regulatory compliance software. Lenders can execute continuous operational audits to know about potential threats, vulnerabilities, and inefficiencies buried in their processes and practices. The objective here is to reduce your exposure to future risks and also save costs.
The second role played by audit management tools is to ensure compliance with financial service regulations such as Dodd–Frank, Anti- Money Laundering, Regulation Z, and others. The tools are preconfigured with checklists, bots, reporting templates, automation workflows, and role-based access to enable audits as per these and other laws. As a regulatory compliance software, audit management tools ensure that you can safely and confidently operate your mortgage business in multiple states of the US while complying with local and federal laws.
Read More: Understanding the Importance of Compliance in Mortgage Processes
4 Ways Audit Management Tools Can Help Your Mortgage Operations
Traditionally, audits were conducted manually through the collection of paper-based documents and long approval processes. This paved the way for digital systems like spreadsheets, which still operate in a legacy manner and only convert paper processes to digital without transforming any of the iterative work. That is where modern audit management tools make a real difference.
These tools allow you to:
1. Gain from the industry knowledge of experts
Audit management tools for mortgage are designed and maintained by industry experts specializing in the laws and regulations relevant to you. The components of these tools are purpose-built for mortgage (instead of generic tools like spreadsheets), and they encapsulate this industry knowledge for future use. This means that you can apply and reapply this knowledge when conducting mortgage audits, regardless of the resource availability at your company.
2. Accelerate data evaluation by utilizing digital audit trails
Today, most mortgage processing software come with built-in audit trails that maintain detailed records of every transaction. Audit management tools can be integrated with your existing origination systems and loan technology to create comprehensive reports automatically. Whenever a data field is missing, some tools will even use artificial intelligence to identify the right data source and fill the gaps. This significantly speeds up the data evaluation step in mortgage audits without involving more people.
3. Scale your mortgage business without adding costs
It is no secret that mortgage providers are grappling with thinning margins, with the cost of a single loan origination often mounting to several thousand dollars. Increasing the headcount to increase your audit capacity will only add to the costs. In contrast, regulatory compliance software like audit management tools would be virtually infinitely scalable. These tools are hosted on the cloud so they can store massive volumes of data as long as you want and need. You can replicate the audit workflows across different products and lines of business – with a few strategic reconfigurations – without extra investments.
4. Maintain compliance across the entire mortgage value chain
Mortgage audits are typically conducted at three stages of the value chain – at pre-funding, during closure and post-closure, and during the servicing stage. The auditor gathers documents related to each of these stages to ensure that there are no overcharges, customer communication follows regulatory guidelines, and the risk level is acceptable. Without an audit management tool, these different steps are often fragmented, leading to cost and effort duplication.
Read More: What Can Mortgage Lenders and Servicers Learn from 2022?
Eliminate Business Interruptions with the Right Regulatory Compliance Software
Errors in audits and bottlenecks in the audit trail can interrupt your business operations and even result in fines. The mortgage industry is heavily regulated, and the compliance burden is only increasing in today’s geopolitical climate. Audit management tools perform a two-part function – they protect consumer rights and ensure that your risk levels are optimal. At Nexval, we equip top mortgage companies with the digital infrastructure they need in today’s highly competitive regulatory landscape. Our industry experts and tech team employ automation to solve your audit challenges and reduce costs.
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