Compliance in the World of Digital Mortgages

The regulations and compliance laws are in a constant state of flux. Find out what’s new in the world of digital mortgages here with BeSmartee.

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The mortgage industry has been undergoing some rapid and dramatic changes lately, especially with the increasing popularity and demand for digital mortgages. To improve these experiences, software developers have been partnering with mortgage companies to create new tools and technologies, but it’s essential for everyone to understand the rules and how to adapt to follow them.

Unlike in other industries where developers can play fast and loose, focusing on developing, digital mortgages impact people’s finances, livelihoods, homes, credit scores and many other important aspects of their lives. While it is necessary to allow room for innovation, strict governance exists to protect individuals and companies from going off the deep end with their creativity.

BeSmartee explores how to stay on the right side of the law and still improve your bottom line in the digital mortgage industry.

Evolving Regulations

As with many other highly technical industries, the law is desperately trying to catch up to the state of current technology. As individuals, banks and other companies have been learning, the rate of technological development is always much faster than the slow plod of bureaucrats and the judicial system. Sometimes, these compliance issues can feel like they’re holding you back from the cutting edge of greatness, but they’re in place for your protection.

As new tools and technologies come along, whether you are part of the team developing them or are just considering incorporating them in your company, it is essential to consider their compliance.

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The Sheriff’s in Town

After the financial crisis of 2008, the Consumer Financial Protection Bureau (CFPB) was formed to stop predatory lending practices. The CFPB plays a major role in creating and enforcing new rules for lenders and is an integral part of the digital mortgage landscape. Every year, they implement new regulations to enhance borrower protections and to prevent another economic collapse.

They can’t plan for everything, though. The CFPB must wait for technologies to become popular, widely implemented, and then used before they have enough information to pass judgement. However, in the meantime, borrowers might be at risk. Therefore, they must weigh the possible risk against the convenience of the tools and implement safety measures. Sometimes, that means that regulations will reduce the efficiency of a tool or prohibit it entirely.

It might seem unfair, but they’re trying to keep everyone as safe as possible. We know how terrible things got before the CFPB’s existence and increased safety measures, so the regulations will always err on the stricter side. They aren’t trying to make things harder or more expensive for lenders; they just want everyone to have an equal opportunity.

Although protecting consumers is their first priority, ensuring their satisfaction is a close second. Generally, the CFPB encourages technological solutions, especially if they promise to make things better on both sides of the fence. They just temper their excitement by remembering how unfettered development can end up biting everyone since it can be challenging to predict the long-term consequences of new technology.

Know Before You Owe (KBYO)

One early example of how regulations impacted the digital mortgage industry was the Know Before You Owe (KBYO) rule of 2015. It was created to help borrowers learn more about available mortgages and shop around before selecting the one that worked best for them. However, with the new regulations, lenders needed to incorporate more information into their pitches to ensure they were disclosing enough to be in compliance.

It required a lot of fine-tuning existing forms and tools to incorporate a new set of reporting standards and a lot of money. Some companies figured that they would be financially better off just crossing their fingers and ignoring the new regulations. Others claimed they couldn’t afford to comply.

Companies that didn’t implement the change quickly enough, or that tried to skirt around the rules, faced millions of dollars in fines. The CFPB was not kidding around, and they made it abundantly clear that anyone found in violation of their rules would be paying up. Big time. Minimizing those fines, or avoiding them entirely, can do wonders for your bottom line and your customers.

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One of the best digital mortgage tools to help ensure your company stays compliant is automation. Some of the benefits of automation include:

  • The ability to enter information and populate data fields, so there’s no worry that information will be mistyped or forgotten during manual input.
  • Options specifically tailored for digital mortgage companies to help you stay up to date on the latest regulations.
  • Helps with generating reports and populating data fields. That might not sound like a big deal, but when you need to be able to prove that all of your loans are above-board and that you’ve been conducting business fairly according to hundreds of separate rules, automation is your best friend.

Choosing Wisely

Considering the severe penalties in place for companies that don’t comply, most lenders think long and hard before selecting their technological solutions.

All lenders need to have their eyes firmly fixed on the latest updates and changes to the current regulations. Selecting from existing tools provided by other companies is a good way to make internal changes to stay compliant.

In fact, being compliant can actually be a serious advantage. At both state and federal levels, there are enough rules to make a layman’s head spin. But, for lenders and lending institutions, these are no-brainers, and they wouldn’t bother being in the market space if they couldn’t prove their own compliance.

It might not be something easily explained to the customers, but plenty of companies want to partner with others and compliance, or lack thereof, is one of the first checks. No one wants to do business with a shady company!

That’s why it’s so vital to pick technology solutions and tools that were specifically made for digital mortgages. With the right tools, compliance is a baked in feature of the software, not something you had to rig up or add on afterwards. That can absolutely work, but it’s hard to stay up to date with your self-made solution, and if something goes wrong, you have no one to blame but yourself.

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When examining a tool or solution, see where compliance falls in their list of priorities. Just because a tool is made for digital mortgages doesn’t mean they prioritized compliance. It might have been an afterthought. That isn’t much better than your own rigged up version and certainly not worth your money. Instead, search for tools that were made with compliance at the forefront of their development.

Here’s why:

  • Compliance-first technology will keep an eagle-eye on changing regulations and be sure to implement them with routine updates in the future.
  • The tools will be created specifically to adapt since everyone knows that regulations are changing all of the time, especially with the volatile economy throughout the COVID-19 pandemic.


Considering the 2008 recession and the economic crises faced from the COVID-19 pandemic, and their effects on homeowners and people looking to purchase homes, increased regulations have been put into place.

It’s not like the mortgage industry was the Wild West before then, but in the past few years especially, strict rules have been enforced to protect home buyers and owners even when the economy is facing a downturn.

Learn why lenders leverage BeSmartee’s mortgage expertise to improve the quality of their digital mortgage experiences while staying compliant by calling us at (888) 276-1579 or reaching out to us at today.