The Challenges with Programming Regulations

Mortgage Servicers are always under pressure to do more with less. The last decade has seen an explosion in regulation governing servicing, but servicing technology has been slow to adapt. By our count, there are 10,780 legal obligations for servicers to follow(1), which presents several challenges. First, many of them are not easy to evaluate:

In Texas: A contract for a loan under the Consumer Loans Chapter must be written in plain language to be easily understood by the average consumer.

Some are easier to evaluate, but not quantifiable:

12 C.F.R. § 1024.33 requires that a servicing transfer notice must include the effective date, the name, address and toll-free telephone number of the transferee, a toll-free telephone number for an individual employed by the transferor… etc. (it’s a long list).

MESH Auditor is designed to take the 1,000+ rules that are quantifiable and encode them into a platform that can run them against every loan in the portfolio every day of the year.

Regulators don’t look kindly on financial institutions who have the data available to them to identify compliance issues but simply choose not to review them. The other side of that coin is: there is a tremendous amount of data, and thousands of legal obligations, and it could take a lifetime to screen for every bit of data that could indicate a violation of every regulation. And, while manual sample auditing is great for catching certain things, it has to be limited, by definition, both in scope and population. 

Which is why mortgage servicers need a tool that can leverage data to analyze all measurable regulations for every loan. MESH Auditor was designed for that purpose, although, after creating it, we realized that it actually has additional uses – more on that in a future article.

(1) We rely on the Winnow legal platform to research mortgage servicing regulations. Their powerful tool is populated with all the existing laws and regulations, and all of it has been reviewed by their legal team. 

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