Avoiding Hefty Fines and Jail Time:

Your Loan Origination System Can Do the Trick

The time has come to pay close attention to today's stricter compliance laws. The United States is waging a battle against fraud, which is now ranked the number one white-collar crime in America. To do so, the government is focusing on strictly enforcing compliance by auditing companies one by one.

The good news is that it's not that hard to be compliant if you're equipped with the right tools. While antiquated loan origination systems can leave you dangerously exposed to a wide range of compliance issues and mortgage fraud, a couple of the newer loan origination systems can automate compliance and shield you and your company from fraud.

Here are six must-have capabilities that you can now expect from a good loan origination system:

1. Automated forms updates
With so many new forms continually being produced, how do you make sure you're being compliant by using the most current and accurate form? Today, loan origination systems can automatically update forms, much like virus software automatically downloads the latest virus updates. Gone are the days of depending on people to manually download and install updates.

2. Encryption
It may seem hard to believe, but one of the most popular loan origination systems currently used by brokers stores loan files in a non-secure format. These loan files can be opened using Windows Notepad, the simple text editor that comes with Microsoft Windows. Un-encrypted borrower files expose companies to all kinds of security issues. As such, using a loan origination system that automatically encrypts all sensitive files is essential. Not only will it protect companies from hackers, it will also protect companies in the event of computer theft.

3. Protection of loan data
Beyond outright computer theft, preventing loan data from falling into bad hands can be difficult, especially when many loan origination systems provide users access to all loan data, and even let users save loan data on a CD-ROM to take away with them. But this need not be the case. Today's great loan origination systems provide selective access to employees depending on their role and access level. Even better, they store all loan data in a secure centralized repository which cannot be downloaded onto a CD-ROM without authorized access, thereby limiting the chances that a fraudster or disgruntled employee can cause irreparable damage.

4. Centralized quality control
Meeting regulatory requirements depends on strict quality control. Yet, many origination systems don't enable management to monitor the quality of company loans since loan files are stored locally on the desktops of many different computers. In contrast, loan origination systems that use a centralized database to store all of a company's loan files enable mortgage companies to monitor all loans in the pipeline.

5. License checks
Making sure that a loan officer is licensed in the state in which he's about to originate a loan can be tricky, especially when companies have several branches nationwide. But doing so can save thousands in fines. That's why it's essential that companies use loan origination systems that have the checks in place to prevent loan officers from originating a loan in a state in which he is not licensed.

6. Secure document delivery
Most originators are unaware that e-mail is not a secure way to transfer data from one source to another. Not only is it not secure, it can also be illegal to transfer unencrypted loan data through e-mail since it compromises the privacy of the borrower. To avoid this, the best option is to use secure document delivery, which is included in some of today's loan origination systems. This technology empowers originators to electronically send and receive loan files securely to intended recipients without using e-mail. It also prevents the possibility of borrower data being intercepted over the Internet.

Unless you think you're immune to fraud and compliance checks, it's time to give your loan origination system a second look. Are you protected?

About the Author
David Lewis is senior vice president of marketing at Ellie Mae, makers of the Encompass® Mortgage Automation System. Used by seven of the nation's 10 largest brokerages as well as small brokerages nationwide, this award-winning loan origination system (LOS) has the fastest-growing adoption of any LOS on the market. David can be reached at David.Lewis@EllieMae.com or at (925) 227-7000.