Frequently Asked QuestionsFrequently Asked Questions
How significant a risk is noncompliance with consumer protection laws?
The mortgage industry as a whole is struggling to comply with consumer protection laws. A remarkable report published by the inspector general for the FDIC reveals that during 2005 (which was the peak year of the mortgage boom measured by number of loans originated), 83% of federally supervised banks that made loans were cited for patterns of "significant compliance violations." You can download the report from the FDIC website by clicking here or going to the FDIC website and retrieving Report No. 06-024. The percentage is presumably higher for state-licensed, non-depository lenders who were responsible for originating 52% of subprime mortgages and are subject to a much broader patchwork of state regulation. Violations of consumer protection laws, can result in rescission (effectively cancelling the loan), defense to foreclosure, fines, penalties and (both civil and criminal) damages that can exceed the original principal balance of the loan. There are also additional reputational risks associated with charges of predatory and discriminatory lending. Investors - including anyone in the chain of title for whole loans and the securitization trust for securities - can be liable, even though the violator was the broker or originating lender. In other words, the investor can be held liable and suffer damages for actions outside its control and for which it did not have knowledge of.
What consumer protection laws does Mavent cover and how are these compliance requirements applied to a mortgage loan?
Mavent analyzes electronic loan data to determine whether a mortgage transaction complies with over 300 federal and state consumer protection laws related to mortgage lending. Specifically, Mavent reviews mortgage loans for compliance with the following sorts of consumer credit issues: truth-in-lending disclosures, usury, predatory lending, impermissible fees, interest rate accrual restrictions (such as negative amortization and balloons payments) and prepayment penalty enforceability. This is explained in more detail in the Baseline Reviews section of this site.
It is important to understand that any number of laws can apply to a particular mortgage transaction. Knowing which ones do is not a simple task. It first depends on how the lender is licensed or chartered.
Licensed lenders operate under the licensing regimes of the various states they lend into. Most states have multiple licenses that grant lenders the authority to make loans. Each such license imposes different substantive requirements governing loan terms. For instance, certain licenses allow subordinate lien loans while others govern loans with higher interest rates. In some states, more than one license will authorize the lender to make the same loan, though subtle differences in the consumer protection requirements apply to the loan terms. Mavent makes sure lenders and brokers are properly licensed (and in good standing) or exempt and then applies the right laws based on that licensing status. It does this by leveraging its proprietary nationwide licensing database, described in the License Verification and Monitoring section of this site.
Chartered financial institutions—such as state banks, national banks and federal savings banks—are subject to different regulatory requirements. For instance, most chartered institutions “export” interest rates from their home state to the target state in which the loan is made. This results in a complex synthesis of both the home state’s and target state’s consumer protection laws—an analysis that is difficult to perform efficiently without automation. Likewise, chartered institutions can in certain cases preempt states laws and in other instances must observe them. Again, Mavent bases its reviews on how an institution is chartered and what permissible regulatory elections it is making. This is explained in more detail in the Lender Profile section of this site.
Once the lender’s license or charter authority is known, as well as its elections, the review must consider the specific transaction terms—such as the APR, interest rate, loan balance, lien position, occupancy type, etc.—to determine which out of the several laws that might apply to the lender is the one that governs a particular mortgage loan.
No other automated compliance solution provides this degree of detail and precision to its analysis. This is one reason no other provider equals Mavent in quality.
back to top
How does Mavent’s legal expertise compare to other automated compliance solution providers?
The quality of the rule development process and the expertise of the rule developers determine the quality of all automated systems. Legal expertise and full documentation are critical to the accuracy of an automated compliance solution. The compliance rules must be maintained by experienced consumer credit attorneys. All rules must be documented in detail. And, nationally-recognized outside counsel must approve each and every rule. Anything short of these criteria is likely to result in poor quality and inconsequential accountability.
Mavent provides the highest quality legal expertise available among providers of automated compliance solutions. The rules in the Mavent Expert System are reviewed and approved by the nation’s leading consumer finance law firms, the very same legal experts from whom our clients’ internal experts seek assistance. In addition, Mavent’s in-house Legal Team has over 40 years of combined experience in consumer finance law and in providing compliance solutions through technology. Mavent’s in-house and outside legal experts work together to continuously identify and interpret all relevant laws, regulations, court opinions, official interpretations, and regulatory trends for every jurisdiction. The legal rules comprising the Mavent Expert System are set forth in over 7,000 pages of documentation, all formally approved by outside counsel. Mavent is unique in that its in-house Legal Team, rather than a team of developers or engineers, is responsible for the compliance rule development and implementation process. This significantly reduces the risk for information to be lost in translation when communicated to developers. True experts and a “consensus” approach to the rule development process ensures that legal interpretations are accurate and well-reasoned, and that the rules are implemented accordingly.
No other provider of automated compliance solutions can match this ongoing investment in expertise and detail. This is one reason no other provider equals Mavent in quality.
back to top
What kind of technologies power the Mavent Expert System?
The Mavent Expert System is built on enterprise class technology designed to meet the demands of financial institutions of any size. As such, Mavent has teamed up with leading technology partners to deliver the highest level of security and reliability in the automated compliance market.
Sun® Microsystems is the platform of choice for the Mavent Expert System when the solution is hosted by Mavent. Sun Microsystems’ servers provide reliability and scalability to meet the requirements of the largest mortgage lenders.
Java™ is the core language in which the Mavent Expert System is written. The Java programming language provides Mavent with the flexibility to continue to expand the system’s features and functions.
Oracle is the database platform of choice in which Mavent houses its rules, review results and other data relevant to the Mavent Expert System. Oracle delivers the performance and reliability demanded by financial institutions.
AT&T provides collocation for and 24/7/365 monitoring of our production servers to ensure business continuity with automatic fail over configurations. AT&T facilities are SAS 70 Level II certified. They offer such enterprise-class features as controlled access, raised floors and specialized systems including back-up generators, dedicated power distribution, climate control, and fire suppression.
back to top
What kind of control does a client have over the rules that are applied to their loans?
The Mavent Expert System is not a one-size-fits-all solution. Rather, the system flexes to meet the unique legal and business requirements of the client. This is accomplished with the following three features:
Lending Profile
Clients can identify the “lending profile” they are operating under to ensure that only applicable rules are applied to their loan files. This would include issues regarding Federal Preemption, Interest Exportation or Statutory Elections. Clients can exercise this control on a global level, or by loan type or jurisdiction.
Client Position Rules
Clients can modify their legal interpretations based on their client position rules, allowing their internal legal counsel to make the final determination on compliance matters.
Client Enterprise Rules
Clients can create specific rules that enforce institutionally-mandated policies or investor guidelines.
The flexibility of the Mavent Expert System, the robustness of its compliance functionality, and the expertise of Mavent’s counsel enables the client to create a compliance tool that meets their specific requirements, rather than having to modify their practices to fit the behavior of the compliance solution.
back to top
What kind of reports can the Mavent Expert System generate?
Mavent provides extensive reporting which gives real-time visibility into the institution’s state of compliance. The results for each loan review are returned to the client according to the appropriate business unit’s specifications, and indicate all compliance exceptions that have been found during the review. Additionally, Mavent archives the results enabling authorized users to view and analyze the results through secured Web access or download.
Report Features:
Identifies Problem Loans
Enhances the Quality Assurance process by identifying all loans with compliance exceptions focusing staff on fixing problem loans.
Analyze Compliance Errors by Type
Reports are available by specific compliance error type (example: TILA, High Cost, State Rules).
Monitors Production Activity
Senior management can monitor job specific, branch or system-level trends for business or compliance issues.
Trend Reporting
Reports provide insights on compliance trends to better inform management on branches or individuals that are facing compliance challenges.
Reports by Loan Type
Senior management can review compliance trends by loan type.
back to top
Is a client's loan data secured?
Mavent collocates its production hardware and associated client data at AT&T SAS 70 Level II certified facilities. AT&T’s enterprise class infrastructure, network services and hardware services ensure physical security, data security and system redundancy.
back to top
How much does Mavent cost?
Mavent's pricing is based on the combinations of the Compliance Reviews a client selects and is discounted based on volume. Pricing based on the complete Compliance Review library is generally competitive with other providers that are offering a more limited, less precise review. Contact Mavent Sales for a pricing proposal.
back to top
Who are Mavent's clients?
Mavent treats its clients with a discretion that mirrors attorney-client confidentiality. For this reason, we do not disclose much information on our web site related to our clients. Mavent's services are used by government-sponsored entities, four of the top five largest mortgage lenders, leading investment banks, and numerous small- and mid-sized lenders. It is a simple fact that no other automated compliance provider can boast a client roster anywhere close to the quality and diversity of Mavent's. We hope that you will invest time to learn about our service, which will help you to understand why Mavent is the clear leader in automated mortgage compliance.