I helped several dozen mortgage broker and smaller lender shops in Connecticut Licensing and Compliance issues in 2006 and noticed the common patterns.
1) Lenders and Brokers are employing originators and not registering them with the Connecticut Department of Banking.
2) 5 out of 6 Newly licensed Mortgage Brokers of less then 1 year in practice and prior to any Banking Department exam lacked most of the state required disclosures and did not do the APR, GFE and Truth In Lending correctly. Two did not even supply the disclosures relying on the wholesale lender to cover those disclosures for them.
3) No record keeping or post closing process in place. The majority of the Mortgage Brokers did not review and stack their documents in a neat order because most of the closing documents were never returned by the closing attorney. 4 out of 6 Mortgage Brokers did instruct or request closing documents after the closing to comply with the record retention requirements.
4) All Brokers and some smaller lenders lacked the knowledge to properly fit compliance into their origination and processing workflows. Most lacked written policy and procedures, none had compliance personnel to address and keep current on issues, loan inquiries were taken often and disclosures were not issued on a timely fashion, most disclosures were sent at the time of closing to try and comply after the fact. Security in the office lacked, employees were on the internet constantly surfing for personal reasons and several times viewing porn right out in the open. Important documents were being thrown in the trash and not shreded.
Hopefully 2007 will be the year that many get into the habit of learning about the entire mortgage process and all of its compliance components.
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