FS Newsletter 123: Mortgage “Purchase Market” Drives Closing Agent Stress

The current “purchase mortgage” market is causing mortgage banks across the country to re-examine their in-house closing party review processes as they have less control of closing agent selection. Additionally, this adds stress operationally and increases risk through closing agent review, compliance, risk management and wire fraud prevention if not actively utilized and deployed at the loan transaction level.   

Mortgage Participants: All Mortgage lenders doing purchase (non-refinance) transactions & any lender that cannot force the use of its preferred closing agents across all closings. Investors or Warehouse lenders concerned about closing agent controls.

Problem: The purchase market is causing increased use of closing parties that may not be in the known universe of lenders approved vendors.  Couple this with the increased risk of wire fraud, cyber security breaches and other contemporary risks in the mortgage closing process and lenders need to seek more efficient ways to manage a large amount of closing parties.

  • Current market risks of wire fraud, data breaches and social engineering of lender and closing agent operations have changed the type of controls and procedures required by lenders to assure good settlement and demonstrate effective compliance and risk management.
  • Even smaller independent mortgage banks (IMBs), community banks and smaller institutions will have 100’s of relationships to manage often with one or two FTEs available to manage the onboarding, compliance review and closing agent risk management process during close including licensing and insurance checks, wire account verification and much more on each transaction.
Solution: Fundingshield has two approaches to managing closing agents and often our clients use both to manage different risks to the enterprise posed by closing agents, the settlement process and cyber security threats.
  1. Lenders use our Guardian Service on each loan closing to certify & confirm licensing, insurance, wire confirmation/verification (called our WAVs service), closing documents, closing agent authority to perform each loan closing and much more allowing for the reallocation of staff who manage outdated spreadsheets trying to keep up with new agents appearing on live transactions.  We can deploy this in hours with minimal training or do LOS integrated solutions for small to top 10 lenders.
  2. Lenders use our Service Provider Compliance (SPC) software in addition to Guardian to automate the management of all third-party vendors including closing agents.  This system allows a lender to use a pre-created list of diligence requirements (or customize their own) “schema” of documents, questionnaires, policy & procedures, contract tracking and much more where the user simply invites the closing party via an email generated from SPC and the system automates the correspondence and tracking of 1000’s of entities easily for the enterprise. Title insurers, settlement agencies, investors and asset managers use this system to simplify the compliance management process.  Access for auditors, inspectors or warehouse lenders looking to do reviews is included.

About FundingShield

Fundingshield protects the Mortgage, Real Estate, Title and Legal Services industries from wire fraud, social engineering attempts, cyber based and settlement agent-based wire fraud. Fundingshield’s cost & time effective solutions deliver the highest level of control & risk mitigation around cyber based threats of wire fraud / diversion helping you improve your bottom line.

For more information on FundingShield, to schedule a WebEx demo or to see what other services we provide the residential mortgage industry please email Sales@FundingShield.com or call (800) 295-0135 x2