Compliance as a Competitive Advantage
By:Maria Moskver
November 7, 2019

Compliance as a Competitive Advantage

Before Dodd-Frank, it was far too common for mortgage companies to fall outside the guidelines set for compliance. Everyone’s expectations were different, in part because there was far less oversight. But the bar has been raised, even for fintech companies who are working near the edges of this regulatory environment.

When you’re developing mortgage software, you’re marketing to businesses and organizations that know they need to be in compliance. Today, taking a compliance-first approach can position mortgage tech companies ahead of the competition, making them attractive partners with banks and non-bank lenders.

Here’s how prioritizing compliance can give mortgage tech companies a competitive advantage.

Compliance Must Be Part of the Fabric of Your Technology

A mortgage tech provider that doesn’t weave compliance into the fabric of their technology is on the wrong side of risk taking. Of course, it is possible to retrofit your products for compliance, but this will cost more time and money than if you were to keep compliance at the center of your product design from the start.

From the beginning, it’s wise to have procedures for measuring and regularly report on:

  • Quality assurance of the customer and data security experience.
  • Downtime.
  • Regulatory updates and their impact on the product.
  • Constant updates to open source code on the back end.

Being able to list these procedures helps outside parties or partners know what steps you take and positions them to ask for additional, stringent requirements if their organization requires it. You can also demonstrate that your products are in compliance by having a formal program in place, monitoring controls, and meeting industry certifications, such as ISO 27001.

It’s possible to start implementing this down the road, but it’s cleaner to have these pieces in place (or at least on your roadmap) from day one. If you don’t know where to begin, start with a compliance checklist of applicable regulations and evaluate how your product’s mortgage regulations compliance at a high level.

Borrowers and Business Partners Want a Simplified Experience

The old process to apply for a loan – filling out page after page of disclosures and regulatory forms was more than a challenge – it introduced a lot of room for customer error, stress, and made it easy to make a mess of the process.

Now that the industry has moved past this, borrowers who use your mortgage loan application software see your program as an extension of their banking experience, and they want to provide a seamless transition between their website and your tools.

To do this, you have to build a compliant product that meets the same standards as the lending institutions you’re working with – and while the broader question of how fintech will be regulated is still unanswered, this is the wisest way forward for mortgage tech companies.

The benefits of having a compliant product platform far surpass the downsides of not having one, such as losing customers or regulatory action. Having a compliance-first approach provides your customers with… 

  • Peace of mind and a sense of security in a world of constantly compromised data.
  • Efficiency. A compliant product that optimizes the customer experience while keeping an eye on the regulations makes your team the experts to help improve the user’s experience.
  • On the back end, borrowers and lenders can feel comfortable knowing the organization that designed the platform they’re using knows and understands the regulatory landscape and can operationalize compliance.

Everyone wants more efficiency because this will help reduce the rising cost of mortgage loan origination. Although the mortgage industry is highly regulated, it is understood at a high level that there is room for innovation and change. Mortgage tech platforms and product experiences that improve the customer experience and are compliance-centric will be well-positioned to increase their profit margin.

The Baseline for Mortgage Software Today Is Compliance

If your product is succeeding in the market today, it’s because you’re providing lenders and borrowers with a seamless experience in which they don’t have to stop and think about regulations or compliance. And that’s how it should be. 

Consider the last communication you received about compliance from a financial brand you trust: It was probably an email letting you know your information had been compromised in the latest data breach. Did this email inspire trust and confidence? Probably not.

This is where your brand has an opportunity to get ahead of the game. If you regularly communicate the state of your organization’s data security and compliance framework, you’re better positioned to handle an issue with your product’s security or regulatory compliance, should that day arrive.

Use Proactive Communication to Foster Customer Trust

When you’re designing mortgage software, you’re marketing to businesses and organizations that know they need to be in compliance. In this way, fintech and mortgage tech are self-regulating industries: major banks and lenders won’t work with companies whose technology isn’t compliance-forward.

By establishing a high baseline of strong customer awareness of your best practices and trust, you’ll ensure that your customers’ ecosystem is full of positive messages about your brand’s compliance practices. If the day comes when your organization experiences a data breach, your customers will know you have their back and that you have a vetted plan.

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