New rules under Dodd-Frank will pose unique compliance challenges for nearly every mortgage lender and insured institution. Last week Elizabeth Warren, special adviser to the White House, met with Silicon Valley executives as part of her work on the creation of the new Consumer Financial Protection Bureau. It is clear that, through these meetings, Warren was looking to find new ways to collect and analyze large volumes of financial information. As a brand new agency, the CFPB has the opportunity to arm itself with the latest and greatest in high-tech information gathering and enforcement. In remarks prepared for a lecture at the University of California, Berkeley on Oct. 28, Warren wrote, “we need to re-imagine the new consumer agency, using changes in technology to propel us.” As regulators get ready to “propel” themselves with new technology, the mortgage industry needs to do the same. It will no longer suffice to rely on out-dated processes for making sure that loans are compliant with all federal and state laws and regulations. The Dodd-Frank act is also expected to give state regulators additional enforcement authority. In many ways this simply builds upon work that the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators have done in creating the Multistate Mortgage Committee to manage multistate regulatory examinations. State agencies have also adopted automation in the form of a new electronic examination (e-Exam) process. Eliminating the concept of a limited sample, state regulators are using advanced technology and analytics to audit loan information across 100% of a lender’s portfolio. In this case, the states’ efforts will probably get started a bit sooner. Starting in 2011 mortgage lenders will start to see more multistate enforcement activity. Several states have already informed their mortgage licensees that they will require submission of loan-level information in electronic form as part of an e-Exam process starting next year. The MMC will likely continue their multistate examination efforts as well. Whether it’s information collection or examination, technology will drive the implementation of Dodd-Frank as well as ongoing multistate examinations. In the coming months mortgage lenders will need to have appropriate technology in place to anticipate and meet the demands of increased reporting requirements and the prospect of regulators scrutinizing 100% of loans that are originated. John Vong is the president of ComplianceEase. Have an issue you want to sound off on? E-mail the editor of HousingWire.

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