Today’s regulatory environment can sometimes feel like an obstacle course. With such a wide range of rules and regulations that touch on so many different facets of the lender’s business, maintaining compliance has become a full-time job. It’s simply not realistic to expect that lenders can properly maintain optimal compliance alone.
Lenders have two options when it comes to addressing compliance: staff a regulatory compliance team in-house, an expensive undertaking, or outsource compliance to their technology providers. Document service providers are a natural fit for the job, since so much of maintaining compliance lies in generating the proper documentation.
In addition to the enhanced technology offerings, many of these services are backed by a team of regulatory compliance experts whose sole job it is to stay on top of shifting regulations and update the technology to meet them. With the current state of today’s shifting regulatory environment, effectively integrating the latest changes into their existing processes without a dedicated regulatory compliance team would present a significant challenge for lenders.
Doc prep services also automate many facets of lending related to compliance, eliminating human intervention and thus narrowing the margin for error. Furthermore, these services often either include or enable integration with other technologies, allowing lenders to digitize even more of their lending workflow to better maintain compliance beyond document generation and delivery.
While the technology and expert guidance are a clear benefit for lenders from a compliance standpoint as a whole, the specific use cases of document services in action are the most compelling indicators of the industry’s need to further evolve with changing regulations.
LOS Integration and Data Validation
Compliant documents rely on accurate data. As the LOS is the lender’s data repository, doc prep providers should support tight integration with the lender’s LOS to be most effective.
Integration between the doc prep provider and LOS allows the provider to automatically pull the correct loan data to generate the right documentation for that specific loan. This data is pulled based on complex algorithms that use rules-based logic to populate and validate all necessary data fields within the document, ensuring greater quality and accuracy.
One area where this is especially helpful is in addressing new UCD requirements. Through this integration, lenders can simultaneously create the UCD XML file and the Closing Disclosure (CD) to make sure these files are an exact match, a requirement of both GSEs.
Doc prep providers can also help lenders ensure the timely and compliant delivery of disclosures to borrowers. TRID requires lenders to mail disclosures to borrowers within three business days after a loan application has been submitted if the disclosure is not provided at the time the borrower initially fills out the application.
With a doc service provider, lenders are able to provide documents electronically, resulting in a quicker turnaround time. Electronic delivery is not only more convenient for borrowers since they can review and sign loan documents from virtually anywhere, but it also benefits lenders as there’s a complete audit trail of generating and delivering disclosures that they can use to prove compliance if it’s ever called into question. This trail provides a detailed history of the loan, including data such as when the disclosure was distributed, when the borrower provided consent for receipt, how long the borrower viewed disclosures for, when and where the disclosures were signed, and much more.
Settlement services integrations
One piece of information lenders must disclose to borrowers in the Closing Disclosure is a good faith estimate (GFE) of how much the loan will cost to close. This calculation is usually handled by the settlement agent, who acts as the liaison between lender, borrower and seller.
However, according to TRID, it’s actually the lender’s legal responsibility to provide the CD. Since there are many costs to factor in and the terms of each loan transaction differs, there’s a wide margin for error if lenders attempt to calculate these costs manually.
Doc services providers support integrations with settlement agent partners so that lenders can more easily collaborate with them on fees, and within the platform where they’re already generating the CD. Not only does this facilitate collaboration and efficiency, but it also ensures that lenders are able to provide borrowers with the most accurate information.
While not an official regulatory mandate, the Consumer Financial Protection Bureau strongly encourages lenders to move away from paper-based practices in favor of a completely digital lending workflow, which enhances the borrower experience by providing more transparency, efficiency and convenience. For example, with electronic document delivery, borrowers can review loan documents to better understand the terms of their loan and clear up any questions before closing.
Utilizing a doc prep provider is a huge step in the shift to digital for lenders. At the very least, this technology enables lenders to generate dynamic digital documents, deliver them electronically to borrowers and support electronic signatures.
But as the industry increasingly makes the push to digital, document prep is often just one facet of the many digital lending and eMortgage capabilities these providers offer. Whether it’s through integrations or native features, lenders may also have access to eNotarization, eRecording and eRegistry capabilities, among others.
Ultimately, doc prep providers are more than just a technology provider – they can be a true partner to lenders. Through the support of legal and regulatory experts, robust automation, audit trails, enhanced efficiency and borrower experience these platforms provide, lenders will see more success in their compliance efforts – and with less work on their part.