mortgage compliance
Mortgage Compliance Laws

Introduction

Mortgage compliance laws for brokers are an essential part of the mortgage industry, as it helps to protect consumers from predatory lending practices and ensures that lenders operate in a responsible manner. Mortgage compliance ensures that lenders, mortgage brokers, and other financial services providers abide by the laws and guidelines related to the origination, servicing, and sale of mortgage loans.

Compliance with mortgage laws and regulations is essential for maintaining fair and transparent mortgage markets as well as building a successful brokerage.  Here are several of the key laws that mortgage brokers must abide by.

Truth in Lending Act (Regulation Z): This law requires lenders to provide borrowers with clear and accurate information about the terms of the loan. This includes the annual percentage rate (APR), the total finance charge, and any points or fees.

Real Estate Settlement Procedures Act (Regulation X): This law requires lenders to provide borrowers with a good faith estimate of closing costs and other fees associated with the loan.

Equal Credit Opportunity Act (Regulation B): This law prohibits lenders from discriminating against borrowers based on certain characteristics, such as race, religion, national origin, or gender.

Home Mortgage Disclosure Act (Regulation C): This law requires lenders to disclose certain mortgage-related data, such as loan origination and denial rates, to the public.

Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act): This law requires all mortgage loan originators to be licensed and registered with the National Mortgage Licensing System (NMLS).

Fair Credit Reporting Act (FCRA): This law requires mortgage brokers to comply with regulations regarding the use of consumer credit reports.

Fair Debt Collection Practices Act (FDCPA): This law requires mortgage brokers to comply with regulations regarding the collection of debt from consumers.

Gramm-Leach-Bliley Act (GLBA): This law requires mortgage brokers to develop, implement, and maintain a reasonable information security program to protect customer information.

Adhere to industry best practices: Mortgage brokers should adhere to ethical practices, such as providing accurate advice and information to customers, treating customers fairly and honestly, and maintaining customer privacy.

Do Mortgage Brokers Have to Keep Records?

Mortgage brokers must keep records of all the activities related to the origination and servicing of mortgage loans. These records must include customer information, loan applications, loan documents, loan payment histories, and any other information related to the mortgage loan. The records must be maintained for a minimum of three years from the date the loan is closed.

The law that requires mortgage brokers to keep records is the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), enacted in 2008 and mentioned above. The SAFE Act requires all mortgage loan originators to be licensed and registered with the National Mortgage Licensing System (NMLS). The law also requires mortgage brokers to keep records related to their activities for a minimum of three years.

Benefits of Document Management Solutions

Document management solutions, like CaptaFI loan pipeline software, offer numerous benefits for mortgage brokers. They provide a secure, organized system for storing important information and documents.  With CaptaFi’s unlimited document storage and record policy, helps ensure all required documents are securely stored and easily accessible. Additionally, these document solutions help streamline the loan process as well as allow brokerages to remain compliant with document retention laws.

Penalties for Failing to Abide by these Regulations

The penalties for failing to abide by mortgage compliance laws vary depending on the type of law or regulation. The penalties can include fines, sanctions, or even criminal prosecution. Additionally, mortgage brokers may face civil liability for any losses or damages caused by their non-compliance.  For loans with less stringent requirements, look into hard money lenders.  Many times the process for a hard money loan is simple and quick, although at a higher interest rate.  Here is a good article if you are curious about hard money loans.