RegulatorConnect Overview

Since the middle of 2007 in the wake of the mortgage meltdown and subsequent 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 mortgage examination process. The guidelines called for the adoption of a technology solution that would help expedite regulatory examinations by verifying loans against numerous federal, state, and municipal laws and regulations such as anti-predatory lending / high-cost legislation, Truth-In-Lending Act (TILA), and state consumer credit laws.

Following an eight-month evaluation process, ComplianceEase’s automated compliance system, ComplianceAnalyzer®, was selected as the automated examination system to be incorporated into the audit process. A primary goal of the MEGs set forth by CSBS and AARMR is for ComplianceAnalyzer to be incorporated into examinations by banking and residential mortgage regulators from all 50 states and the District of Columbia. Instead of the traditional sampling methodology, state examiners will transition to reviewing 100% of a licensee’s loan production and loan portfolio in the course of an examination.

The ComplianceAnalyzer software has also been adopted as the state supervisory technology solution by the Multi-state Mortgage Committee (MMC), a committee of 10 state mortgage regulators formed by AARMR and CSBS to coordinate state supervision of the largest mortgage companies in the state system. The cornerstone of the examination initiative is the CSBS/AARMR Nationwide Cooperative Protocol and Agreement for Mortgage Supervision (Agreement) signed by all states 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 License 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 examination process, including the facilitating of the electronic extraction of a licensee’s loan data from the loan origination and/or loan servicing systems, RegulatorConnect.org was developed to provide resources to guide licensees through an automated examination process. The RegulatorConnect platform 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 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 expenses

One-time Compilation and Configuration Process

In order to facilitate the use of advanced technology in the examination 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 examination flow. A simple one-time setup process through RegulatorConnect facilitates the data export of the information required by any state regulator in any jurisdiction. Subsequent examinations can leverage the initial setup, reducing the total time and cost of all future audits.

For loan origination systems or loan servicing systems that are certified with RegulatorConnect, a bulk export capability may already be directly available.