Creating a Compliance Department Capable of Defending Your Firm

Anyone with even a few months' worth of experience in the mortgage industry will tell you that a single compliance mistake can erode months or even years of lender profit. A single buyback request can undo the hard work of many loan officers over many months. This is exactly the reason every lender should spend time focusing on creating a compliance department capable of defending their firm.

Every lender knows that an effective compliance program is not optional. It's essential for defending your firm against costly penalties and reputational damage. But how good is good enough.

To learn more, we spoke with Melissa Kozicki, CMB, CMCP, the Director of Compliance at Mortgage Cadence.

Going beyond the checkbox

The first thing Kozicki told us was that she is not an attorney and her comments should not be construed as legal advice. We know that she has a number of attorneys on her staff and works with lender counsel across the country.

With more than 20 years in mortgage origination compliance and a decade of mortgage software development expertise, she’s been around this block a few times. When it comes to compliance management, there aren’t many in the industry who can operate at her level.

So, we asked her what it takes to create a lender compliance department that can successfully keep a lender safe.

“Building a compliance department capable of truly safeguarding your business requires going beyond basic check-the-box efforts,” she told us. “It demands a proactive, strategic approach.”

At the core of this approach is open dialogue with regulators. Too often, firms take a passive stance, operating based on their own interpretations until receiving a judgment or enforcement action. But waiting for the other shoe to drop is an unwise gamble that can lead to severe consequences down the line.

The smarter path is engaging regulators directly to validate compliance strategies before launching them.

Working with industry regulators

Kozicki points out that she’s not suggesting lenders ask their regulators for explicit permission on every little thing.

“It means being upfront about your firm's objectives and plans,” she says. “Lay out what you're trying to accomplish and how you plan to do it compliantly, then get the regulator's take on whether your approach seems reasonable.”

Go through this process thoroughly – conduct due diligence on potential concerns and bring in legal counsel to cross every "t" and dot every "i." Then, present your perspective firmly while remaining open to the regulator's viewpoint.

Shift from a reactive, permission-based mindset to one of shared responsibility. Check your process, from top to bottom. Then, do it again on a regular basis.

The lender must be the compliance expert, but Kozicki says regulators can provide guidance to validate whether you're applying that expertise properly.

“The goal isn't achieving a pristine, failure-free process - that's unrealistic and dangerous thinking,” she says. “The goal is developing a rock-solid system for navigating issues as they arise.”

Do that, and you’ll have a compliance department that can act like a defender if you find yourself on the wrong side of the line. For more information about how Mortgage Cadence works with its lender partners to develop such a system, including the clear policies and procedures that make it work, reach out to us today.

By Melissa Kozicki, CMB, CMCP, Director of Compliance at Mortgage Cadence 

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Mortgage Cadence: 
Alison Flaig 
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(919) 906-9738