Regulatory Compliance

Florida Statute 494 is the law mortgage professionals act under in the State of Florida. Florida’s Administrative Rule 69 imposes further rules and guidelines for operating under Florida Statute 494.

After reading the statutes and administrative rules, I recognized regulatory non-compliance existed in the form of loan documentation. A combination of Federal and State law mandate the contents of a loan file. Among other things, a series of disclosures must be signed by the borrower and present in each loan file. What I noticed was that applicable laws were not being followed as they pertained to loan documentation.

I raised the issue and was able to get another procedure change effected requiring that a checklist be created for closed loans to insure that documentation required to be part of a loan file was in fact present and properly filled out.

The reality of changing habits to comply with this new rule was difficult in that the entire company was involved; loan officers and loan processors.

Adding to the difficulty of changing habits was the general perception that Federal and State mandated disclosure statements were mere regulatory fluff and few companies ever had their files audited. Furthermore, in the perceived unlikely event of being audited by the Florida Office of Financial Regulation, a fine would be less expensive than the cost of compliance.

In sum, a widespread perception existed that a loan file with incorrectly filled out, or missing legally required documents was no worse than driving 56 mph in a 55 mph zone.

This cavalier attitude towards regulatory complaince may have worked during years when prices were generally rising and underwater borrowers weren't scouring loan documentation looking for a way out of the loan. However, once the market went south, many brokers and lenders across the nation found out the hard way that there are no unimportant documents that are required to be part of a legally binding contract.