Surviving your next audit
n Build a relationship with the auditor.
n Prepare ahead of time for the exam.
n Be organized and diligent.
n Show proper exam etiquette.
n Determine the best person to
answer key questions.
n Ask lenders for an assist.
Jeff Midbo is senior vice president and chief compliance officer/
deputy general counsel at United Wholesale Mortgage (UWM).
He leads the UWM team responsible for compliance expertise
and keeping team members and clients informed on the
regulatory environment. Midbo’s team provides legal advice
to business units on best practices for complying with
applicable laws, oversees the examination process with state
and federal regulators, as well as consumer advocacy. Reach
Midbo at firstname.lastname@example.org or (800) 981-8898, ext. 4279.
Phil Mastin is assistant vice president and director of regulatory affairs at United Wholesale Mortgage (UWM). Mastin
plays an instrumental role in protecting UWM from regulatory risk. He leads the team responsible for managing UWM’s
examination process with state and federal regulators. His
team also conducts internal testing of process and technical
controls to ensure compliance with state and federal requirements. He’s been in the mortgage industry since 2003. Reach
Mastin at email@example.com or (800) 981-8898, ext. 3368.
Don’t Lose Your Cool When
You Get Audited
There are ways to survive and thrive a gut-wrenching process
By Jeff Midbo and Phil Mastin
You’re going to be audited. Those five words will make the hair on the back of any mortgage originator’s neck stand up. Originators know they can be audited
at any time and have come to expect it as part of their
profession. Given current market trends and the climate of the Consumer Financial Protection Bureau
right now, originators need to be more vigilant than
ever when it comes to examinations, both at the
national and local levels.
For the first time in a long time, the industry is functioning as a true purchase market, with purchases
making up over 70 percent of mortgage originations.
That has cranked up the competition for business in
a big way, which means intensified monitoring by
national and state regulators to ensure that borrowers
Now, more than ever, it’s especially important for
originators to be well-prepared and proactive in their
compliance efforts. Following is an overview of what
mortgage originators can do to make sure they remain
compliant in today’s purchase-heavy market.
Prepare and organize
Mortgage originators know that relationships matter,
both with their borrowers and real estate partners. They should take a similar approach with their
Regulators are not the “bad guys.” They are there
to help professionals in the industry be successful the
right way. Their rules are in place to protect the reputation and legal standing of businesses just as they are
protecting consumers’ best interests.
Don’t be afraid to communicate with them.
Regulators want originators to reach out if they have
questions so they can get them the information they
need. Regulators aren’t going to give you legal advice,
but they will frequently provide feedback as to how
they approach the various rules.
Set yourself up for success. Every originator is going
to be subjected to an examination at some point, so be
prepared. The 11th hour is not the ideal time to start
focusing on compliance.
Originators need to prioritize compliance from the
moment they are licensed to avoid being in scramble
mode while preparing for an examination. Don’t hope
for the best when it comes to exams. Being prepared
is half the battle.
Make sure that you are organized. During an exam,
there is always a back and forth between originators
and examiners. Be diligent about what documentation
you’re providing and what’s requested of you.
This ensures that you’re not missing things and
you’re fulfilling all of your obligations to the regulator.
Make sure you know where your loan files are, make
Seek the right answers
sure they’re organized, and make sure you can provide
a clean set of documentation to the regulator. If you
give them everything in a timely, organized fashion,
and it’s compliant because you’ve been doing due
diligence all along, it’s going to make everyone’s life
easier, especially yours.
When an exam is in progress and regulators are at your
office, things can be a little awkward. But they don’t
have to be. Being proactive in communicating with
your examiners will go a long way toward ensuring
things go smoothly.
When the regulators are communicating with you,
respond in a timely and accurate fashion. If they ask for
something, and you don’t have it at your fingertips, let
them know you’re working on it.
By showing a sense of urgency, you show the regulators that you’re taking the exam seriously. If you don’t,
how do the regulators know that you’re giving compliance in general the attention it deserves when they’re
not in your office?
When it comes to compliance, don’t try be a hero
if you don’t have the cape. Meaning, if you’re not the
best person at your company to handle compliance,
then find somebody who is. It can be another originator, an office manager and so on.
You don’t need to be an attorney to be aware of
how the business is being conducted, but it is important that someone is identified who can stay on top
of it. Originators need to understand their strengths
and weaknesses when it comes to compliance and act
accordingly, so they’re set up for success when examinations occur.
If you have questions about any of the topics covered in this article, your lender may be able to point
you in the right direction. Keep in mind, lenders cannot provide actual legal advice when it comes to compliance. As a trusted business partner who typically
has more resources at their disposal, however, your
lender can be a good source of information. Think of
it this way: A lender can provide originators with the
“why” behind the way things are done. They just can’t
tell you how to handle those things.
n n n
Originators know that buying a home is likely the largest financial transaction in a borrower’s lifetime. The
moment that the loan process begins, originators have
access to borrowers’ most personal financial information, so it’s only natural that government regulators
are going to make sure the borrowers are being protected. If you’re doing the right things as an originator
when it comes to compliance, however, you will be
ready when you hear those five words: You’re going
to be audited. n
This material is intended for general information purposes only and does not constitute legal, compliance
or other professional advice or an opinion of any kind.
No recipients of this material should act or refrain from
acting on the basis of this material without seeking appropriate legal/compliance advice. United Shore Financial
Services and United Wholesale Mortgage expressly
disclaim all liability relating to actions taken or not taken
based on any information presented herein.