Multi-State examinations are coming. In a process began in 2008, the Conference of Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) have begun preliminary exams this year. In 2011, however, all states are expected to participate in the program, which applies a standardized approach to state regulatory exams.
“This progress on the coordination of multi-state examination efforts builds on the states’ success in developing a nationwide mortgage licensing system in January 2008,” CSBS and AARMR said in a joint press release. “Forty-six states are scheduled to participate in the nationwide licensing system [in] 2010, with all states expected to participate by 2011.Â Currently, over 11,000 companies and 66,469 loan originators are licensed in the nationwide system.”
The purpose of the exam system is to unify the various exam methods, modernize the collection and analysis of loan data and improve the effectiveness of supervision programs.
What should lenders know about the exam? Here’s a quick overview of the major components.
Unity Across State Lines
The primary goal of this initiative is to protect consumers, identify fraud and minimize the regulatory burden and expense for lenders. At the heart of this initiative is an effort to pool the resources and information collected by various state officials. The multi-state exam process creates a “pool” of state examiners who will conduct exams under the direct supervision of a single “examiner-in-charge.” The goal is for a single examiner to conduct one exam that will be accepted by every state the lender works in. Conducted properly, this should reduce the compliance costs of preparing for separate exams from each state agency.
Modernizing the Exam Process
The multi-state exam has also resulted in changes to the use of technology in reporting information to examiners. CSBS and AARMR have adopted a technology approach to automate collecting, reporting and analysis of loan data.
Previously, exams would select random samples from a portfolio to test. Under the new standards, lenders will be required to utilize an automated compliance system to review the computation and transaction data for 100 percent of the portfolio. The agencies selected ComplianceEase’s RegulatorConnect™ as the system of choice for uploading these Licensee Examination Files (LEF).
The use of RegulatorConnect is not required, and several compliance service providers, including DocuTech, are preparing systems that can package loan data in a format compatible with the LEF.
As a result of these automation changes, the multi-state exam agencies are also developing new ways to conduct more reviews off-site. This should also help lenders spend less time preparing for on-site exams.
For more information on the multi-state exam, visit AARMR at www.aarmr.org.