April 2016 - Tech Revolution

TheMReport — News and strategies for the evolving mortgage marketplace.

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24 | TH E M R EP O RT FEATURE made a decision to hire into the line operation one recent college graduate who was proficient in using Microsoft Access and writing Excel macros. The all-in cost to hire this individual was $85K! And, within about one month's time, we had the [technology] tools we needed to do business, remain in strong control, and operate in a compliant manner." Case in point: Some resourceful 'out- of-the-box' thinking helped save this firm nearly $1MM in development costs and nearly eight months lead-time. Better with a BST C learly, surviving in today's market- place is dependent on having a strong commitment—both organizationally and financially—to a robust internal control environment designed to protect con - sumers. Many mortgage banking firms today have implemented formal Business Self Testing (BST) programs designed to ensure proactively that both lending and servicing functions are properly managed and tightly controlled to ensure proper consumer protection. A strong BST func - tion has numerous benefits, including helping firms proactively identify issues, reduce process redundancies, streamline operations, and ultimately lower costs. In addition, internal/external auditors are beginning to view strong BST programs as a helpful tool in assisting with scope modification and testing. The net effect here is an overall benefit to the business in that regulators and auditors spend less time performing transactional testing and related analysis; hence, audit and related business costs can be minimized. Having a strong BST program does indeed require some investment in the right technology tools. Simply speaking, the purpose behind having a formal BST program is for business owners to monitor ongoing compliance with legal and regulatory requirements for certain processes and functions performed throughout the organization. An effective BST program should be designed to monitor compliance with applicable laws and regulations via periodic and continuous testing of these processes. Through a program of independent monitoring and testing that is generally performed by a designated Management Internal Control (MIC) audit utility that is part of the line's organization, reasonable assurance can be obtained to validate that key assumptions, data sources, and procedures utilized in measuring and monitoring compliance risk can be relied upon on an ongoing basis. In the case of transaction testing, assurance can be obtained that controls are working as intended. The testing of controls and timely remediation of deficiencies are essential to proactively maintaining an effective internal control framework. To be most effective and reliable, credible MIC functions performing BST should have a dual reporting line into both the designated business head and into the chief executive's office. Specifically, this dual reporting structure ensures that the following two essential factors coexist: • Business Ownership: To ensure complete ownership by the business (whether it be origination, servicing, default management administration, etc.) exists to ensure that practical business concerns are taken into consideration when implementing and monitoring regulatory compliance processes necessary to balance consumer protections with goals and initiatives to grow the business; and • Independence: To ensure an appropriate level of independence is maintained in order to provide an overall sense of credibility to the function as well as to provide necessary comfort levels to all internal/external audit and external regulatory constituencies. Minimal Investment, Maxi- mum Results G iven today's strong regulatory focus and scrutiny, many are beginning to realize the costs associated with this added level of internal control and oversight is an absolutely critical invest - ment necessary to properly maintain and grow their business. There is also a growing realization among key players in the industry that spending a truckload of money is not necessary to ensure a strong BST program exists. "We recently implemented a Business Self Testing Program, which [has thus] far been a huge success. Programming costs were kept to a minimum, as we hired a smart kid to help automate everything we needed, using some basic software tools. CFPB and TRID compliance has improved, and recently we underwent an audit where the BST program we implemented drastically cut down on audit time. It saved us time and money, and has made us a stronger company!" says a senior manager from a Texas-based, medium-size loan origination and servicing organization. With a fairly minimal investment, this Throughout the mortgage market's twists and turns, IDS has proven a track record of growth and sustain- ability. Over 30 years, IDS has met compliance demands head on and been at the forefront of technological advancements. DOC PREP YOU CAN DEPEND UPON.

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