RegTech Brings Much Needed Automation To Mortgage Lending

The mortgage industry is no stranger to technology. These days you can attend open houses, get a mortgage and buy a home all from a mobile app.

But the digital innovations aren’t only happening on the consumer side. Mortgage lenders are benefiting from the automation of regulatory processes.

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Known in the industry as RegTech, using advanced technologies startups are creating digital platforms that automate monitoring, reporting, and compliance. These platforms ensure lenders don’t run afoul of ever-changing regulations and the increasing demands of investors. Take anti-money laundering rules that went into effect in February of 2012. It requires non-bank residential mortgage lenders and originators to have anti-money laundering programs on the books and to file suspicious activity reports. That’s just one example of the increased requirements mortgage lenders face.

RegTech benefits lenders in a variety of ways. Thanks to artificial intelligence, machine learning, and analytics, RegTech is able to analyze huge amounts of data, quickly approving or denying loans. The underwriting process isn’t held up by additional document requests and mistakes.

The platforms also ensure compliance and detect fraud. That boosts customer service and the bottom line for lenders. Welcome news given the cost to process a mortgage has been rising, even with the introduction of technology. The success of a mortgage company lies in the ability to efficiently process loans. RegTech lets them do that.

It also provides the transparency investors want when validating how a lender came to its lending decision. Without the assurances that the loans were underwritten properly an investor could balk at purchasing the package of mortgages.

When it comes to RegTech platforms, there are some must-haves. Automation is critical to ensure that data remains accurate throughout the underwriting process. Validations are built in to confirm the data at every step along the lending journey. The aim is to cut off any problems in the beginning so there are no delays in issuing the loan. Compliance should also be automated within the platform. Relying on robotic process automation or RPA, manual processes are removed from compliance, speeding up operations and reducing costs. Ultimately the systems have to be adaptable. Regulations change often, requiring new data sets or actions to remain compliant. A good RegTech platform will be able to evolve with market changes.