Episode 29: The State of Mortgage Compliance, August 2023

Episode Description

This week I sat down with our Senior Director of Client Success here at PerformLine, Rhonda McGill, to discuss the state of mortgage marketing compliance. This month we hosted our quarterly roundtable with compliance leaders in this space, and during today’s episode, Rhonda and I sat down to discuss some key takeaways from that event, including: 

• The ongoing complications with manual compliance review of loan officers
• The increased risk of loan officers seeking additional revenue from affiliate partnerships due to the interest rate market, and what compliance teams can do to mitigate this risk
• Compliance Concerns with Loan officers adopting group names (or “team names”) for branding and how to address the regulatory scrutiny around these
• The ever-popular topic of monitoring loan officers across social media, specifically the new platform Threads
• And finally, remote work policy requirements that are being issued by states and how compliance teams can proactively address these.

Show Notes:

• Tips for Effective Collaboration Between Marketing and Compliance Teams: https://bit.ly/3Pa7ejN
• Social Media Compliance Checklist for Loan Officer Training and Oversight: https://bit.ly/3srXvxq
• COMPLY Mortgage Industry Roundtable: https://bit.ly/47PH8uD
• Connect with Rhonda McGill: https://www.linkedin.com/in/rhonda-mcgill/
• Connect with Ashley “AC” Cianci: https://www.linkedin.com/in/ashley-cianci/

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About COMPLY: The Marketing Compliance Podcast

The state of marketing compliance and regulation is evolving faster than ever, especially for those in the consumer finance space. On the COMPLY podcast, we sit down with the biggest names in marketing, compliance, regulations, and innovation as they share their playbooks to help you take your compliance practice to the next level. 

Episode Transcript:

Ashley:
Hey, there COMPLY podcast listeners, and welcome to this week’s episode. This week I sat down with our senior director of client success here at PerformLine, Rhonda McGill, to discuss the state of mortgage marketing compliance. This month we hosted our quarterly round table with compliance leaders in this space. Today, Rhonda and I sit down to discuss some key takeaways from our event, including the ongoing complications with the manual compliance review of loan officers, the increased risk of loan officers seeking additional revenue from affiliate partnerships, and what compliance names can do to mitigate this risk, compliance concerns with loan officers, adopting group names for branding, and how to address the regulatory scrutiny around these, the ever-popular topic of monitoring loan officers across social media platforms, specifically the new platform threads, and finally, remote work policy requirements being issued by states and how compliance teams can proactively address these. As always, thanks for listening, and enjoy. 

Ashley:
Hi Rhonda, welcome to the Comply podcast.

Rhonda:
Hi AC, always good to be here with you.

Ashley:
As you guys know, Rhonda is our in-house mortgage industry expert, and for those who have been longtime listeners of the podcast, you will know that she hosts one of our staple events every quarter, our Mortgage Industry Roundtables, where industry leaders come together. They discuss what’s happening in the mortgage industry and, specifically, what’s happening with compliance as it pertains to their companies and their department. So it’s a great opportunity for folks to come together to chat with their peers, and Rhonda has been leading that for quite some time now. So today, Rhonda’s joining us. We’re gonna do a quick recap of our August round table conversation, what folks talked about, and then Rhonda takes on what folks can learn from that conversation. Thanks for being here, Rhonda.

Rhonda:
Yeah, thank you so much for having me. And yes, it was a great conversation. I was just thinking we are going into the third year of the Mortgage Roundtable. 

Ashley:
Wow, we are. Rhonda and I started the Mortgage Roundtable back in

Rhonda:
2020, 2021

Ashley:
It’s been awesome to see it grow. I’m super happy with the folks that are on there, so if you’re a part of the roundtable, thank you. And if you’re not, come join. It’s a great conversation.

Rhonda:
Always, always, always, I love it!

Ashley:
Awesome. Well, let’s get started. Every time we start a roundtable, or Rhonda starts a roundtable. Rhonda, you start out by asking participants what is the top compliance challenge they are facing today? And this quarter, the majority of them said compliance monitoring. So, can you just elaborate on the manual aspects of compliance monitoring, especially that of loan officers in the mortgage industry, that was discussed as a result of your question?

Rhonda:
You know, it is so funny that after all these years, I have been in the compliance space for almost a full decade. But, that has been like one of the biggest challenges is just that, that monitoring process. When you are doing a marketing compliance piece, there is a lot of little things that may be state-mandated or federally mandated. There are disclosures and disclaimers, and all of those things that are required are a part of that process. You have got a group of compliance professionals, and they are the pros, and they review all of the content, make sure that it’s done right, give the thumbs up or the thumbs down, and make you do the corrections. And once they get it together, then it is onto consumer-facing. One of the things that I have noticed is that a lot of folks in this current environment where interest rates are up, the inventory is low, there’s a lot of folks that are, they are desperate, and that desperation can roll into, you know, sometimes the going rogue aspects of the marketing compliance space.

Rhonda:
So folks are not necessarily on top of things because also compliance teams are smaller. You know, everyone is working lean, but the amount of content that is coming at them. It is coming at a fast clip. Definitely, folks were very concerned about the monitoring process, the volume that is coming their way, and just trying to make sure that they can get their content approved. So that definitely, and we will talk about it in a little bit, but there’s a definite need to hit a reset button on collaboration between the marketing teams and the compliance folks so that we can make sure that they are doing things right.

Ashley:
Absolutely. And I think the rising interest rates have been the kind of cornerstone of conversation, I would say, of this group for the past several quarters now. Highly impacted by it. And even though we focus on compliance, it’s the domino effect, right? Like you said, the loan officers are getting a little bit more, they need to bring in… 

Rhonda:
They are trying to find their customer.

Ashley:
Exactly. So a domino effect on the compliance department. That is a perfect segue to my next question. Obviously, these rising interest rates, they are the top concern for this industry, and because of that, some loan officers are seeking additional income through affiliations with other businesses such as insurance companies, title companies, etc. Can you just give more contacts as to the motivation behind these partnerships and then the risk they bring to these mortgage companies?

Rhonda:
Yeah, and this was kind of a new one for our roundtable discussion. And you know, right now, because a lot of the loan officers are not making money originating loans, they are trying to find other avenues to generate some income. I think the majority of folks were saying collaborating with insurance agencies and realtors and all of those different things, but there is this other aspect of, you know, it’s happening, and there’s not necessarily the LO reporting to the company.  That they are out there doing this additional, you know, source of income. So it’s something that I think the executive level of management has to become a little bit more aware of. Compliance folks are stumbling across certain things when they are out here monitoring the web or on social, and they are finding these things out.

Rhonda:
And this is risky to the business because there are a lot of implications. A lot of folks are worried about what respite violations could be had depending on what is being said, or are they advertising together? So all of these are things that are kind of front of mind for the compliance folks. And so this is where we talk again about risks. So if you have got a LO that is out there doing their thing and you have got the compliance folks that are focusing on the brand, it could become a nightmare. And when a regulator comes in and tells you, “Hey, did you know your loan officer is out here generating leads from another source?” All of those are things that I think a lot of our compliance folks are concerned about.

Rhonda:
They are trying to keep their eyes on, and rightfully so. But it’s probably a good time for them to also use this as an opportunity to definitely let executive management know that this is something that is happening. And to also do a little bit of configurations of their conflict policies. You know what are the conflicts of interest there? Just try to avoid those, the joint advertising pieces, when they’re getting engaged with that. And just recently, CFPB has taken action against the lender for providing incentives in exchange for referrals. This is a time where yes, folks are trying to find other ways to generate income, but at the same time, it’s also a time to be really on top of what is happening and what are folks doing.

Ashley:
Yeah. It is interesting. Like you said, we have never heard about this avenue of revenue for loan officers, so it does make sense. It would open up a whole other, for lack of a better word, can of worms for the compliance team to make sure that everything is compliant, you know, the risk is managed. So it is interesting. It is just different and new, but definitely something they could keep their eye on.

Rhonda:
And it is probably a practice. You know, folks are probably doing this and have been doing it, but it just seems like it is becoming more of a trend that mortgage compliance folks are running across on a more frequent basis. And I think it is causing them a little bit of a pause because it is like, whoa, we were not expecting this, how do we address this from a compliance standpoint?

Ashley:
Awesome. So next up, the group talked about compliance concerns with team names. I’m going to put that in quotes. So Rhonda, what are team names? I’m putting those in quotes, “team names” in the mortgage industry and, and why are they causing compliance concerns?

Rhonda:
It is a way of, in this particular instance, and people probably have seen like realtors do it, they have like their mortgage team of realtors. And so, in this instance, these are mortgage loan originators who are kind of collaborating, working together to generate business, and they create a “team name”. One of the struggles that occurs is that “team names” are basically, in the eyes of some states, seen almost like they are setting up their own little business per se. And in doing so, it is important that, because if you do not do it like with a DBA, you know, doing business as team Rhonda McGill a part of Midnight Mortgage or whatever my company is, along with their branding and all of those things, so people know that I’m not an independent person out there.

Rhonda:
It could cause some regulatory concerns. You have got more so at the state level, States are really looking at this because they are the ones who are driving around in their neighborhoods, and they probably are seeing these advertisements and things. And they are going, okay, well, when we do our next examination, we are going to ask them about this, what we saw. It is just making sure that from a compliance standpoint that you understand what the state’s requirements are if there is a need to do DBA. Getting that DBA done, or if you are just not allowing it, just make sure that information is documented and that folks are aware that you just do not allow “team names”.

Ashley:
Makes sense. And again, “team names” is something I had not heard of before our mortgage roundtables. I think it is interesting, too, that with the partnership affiliations, how folks are being just more creative given the environment that they are in right now,

Rhonda:
Lots of creativity out there,

Ashley:
More creativity, more compliance to look out for, really.

Rhonda:
Revealed lots of creativity. Yes, folks are; definitely, they are doing whatever they can to survive the market, and that is going to curtail some of the rules. But definitely, folks are trying to be a little bit more creative. With that creativity also comes a little bit more risk. Yeah. And so, companies really need to determine how much risk they are willing to take.

Ashley:
Makes sense. All right. Last subject, which is not a subject that is unfamiliar to this group, is social media. Social media monitoring of loan officers comes up almost every single time we meet with this group, but this time, a new social media platform was discussed, Threads, which is a competitor to X. Can you just tell us what strategies were shared for managing loan officers presence on kind of all emerging platforms, specifically platforms like Threads.

Rhonda:
A lot of compliance professionals are trying to figure out Threads still. I think a lot of folks are still just trying to figure out social media altogether, but because it is always evolving and changing. More things you can do, a few things you can’t do, name changes going from Twitter to X, all of those are things that folks are just trying to make sure that they are staying on top of as we are kind of moving forward. And social media is always going to be a thing. It is not going away. It is so funny, it seems like every time we meet, there is some new social media. I think it was like TikTok was the big discussion, right? For several of our roundtables, and now we are talking about Threads. It is new, and I think new also brings a little bit of fear, but one of the things that, as we were discussing. There are some folks that do have some companies that do have restrictions on the number of social media platforms and which platforms folks are able to use if they are putting their brand out there.

Rhonda:
And it really helps the compliance teams to really be able to monitor, as you heard, there is some that are still trying to figure out how to monitor because they do not have a monitoring process in place other than manually going in and looking at someone’s Facebook or their Twitter or X, or their Instagram or whatever. With that, budgets have been smaller for some companies, some budgets have had to be cut. And just knowing that folks are getting to a point where they are going backwards in time in terms of their ability to monitor for compliance is something that is really scary, and there is a lot more exposure with that. I think they are trying to control it by saying, “Hey, we don’t want you to use these particular platforms so that we can monitor them for compliance.” But one of the things that is important, and we talk a great deal about, is the importance of providing clear guidance, regular training, and just making sure that your LOs know all of the things that they need to do. Almost literally giving them that guideline in the checklist format of making sure that they are checking those boxes whenever they are doing any advertising on a social media space. 

Ashley:
Yeah, absolutely. Guidelines and templates. And Ronda just said checklists. So for those of you who have not seen it yet, PerformLine has put together a social media checklist for loan officers on kind of what to look out for and some good instructions. I’ll drop that in today’s show notes for anybody who would find it valuable as well.

Rhonda:
Absolutely. It is, and it is just those little things that can just go a long way in making sure that your loan originators are compliant.

Ashley:
Wow. Exactly. All right, one last thing to chat about, remote work. One attendee specifically mentioned the updated Oregon remote work policy. Can you just give listeners a quick rundown of the key aspects of this policy and how mortgage professionals are grappling with its implications?

Rhonda:
So I, taking it back a little bit further, during the pandemic when life kind of shut down, a lot of loan originators had to work remotely. You know, they had to work from home. And once things began to open up and folks started returning back to their offices, there was still this grappling with the states on who is going to continue to allow this remote working atmosphere. And now people want that. You know, this is something that people have gotten used to. But there also has to be some guardrails around it because you have the implications of privacy. How you do all of these different things remotely and not be in an office? What can you do if you have files? What do you do with that paper? How do you dispose of it? Do you have a shredder? So it’s all of those things. 

Rhonda:
Last year, I believe it was in 2022, Oregon finally went online allowing the remote work, but they also had some guidelines around it in terms of the compliance pieces, which included being able to do kind of the assessment of what does the LO have in their home to ensure that there is that privacy and all of those things that are important. The bigger question was, if someone does not live in your state how do you go out and do the inspection to document that? So we would have some folks that were ready to fly, and they were like, hopefully, we got some folks in Hawaii, we would love to go check them out.

Rhonda:
And I’m like, I’ll sign up for that. But we also had a lot of folks that were, you know, trying to figure out if the state would let them be compliant by just maybe providing video. Yeah. And almost like when we were in that weird phase of havingn NMLS was allowing folks to do their NMLS testing. And so you have a proctor who shows up online, and you have to take your monitor, and you have to show the room. All of those are things that I think a lot of folks during that particular roundtable, they were just kind of grappling with how do we ensure the compliance without having to necessarily show up and knock on someone’s door and search their office space.

Ashley:
It is so fascinating, is it not? Like thinking about it, when we all started working remotely and now the implications years later of what it means for these industries that are incredibly regulated, required, and,

Rhonda:
And they are. But one of the things that I was thinking about it kind of after the fact, and it is making sure that there is also that layer of the LO not having people come to his or her home. Also making sure that they’re not marketing themselves as the remote LO and providing their address or anything on flyers or whatever. So there is also another aspect that from a compliance standpoint. There are some additional things to think about to make sure that you’re in control of the marketing pieces that they are not putting their home address on anything, or their personal PO box, or whatever it may be. But there is a whole nother layer of thought that I just kind of came into my mind, and it was like, I hope that folks are thinking through those things and that people are not out there saying “send it to my PO box, my personal PO”. You know, that could absolutely be problematic.

Ashley:
Wild. So just wrap that up. In general, any quick tips for how these companies can proactively address remote work policy requirements and potential future implications of what is to come?

Rhonda:
You know what, I think that the best thing that compliance folks can do is just develop strong guidelines and guidance for their LOs. They have to also understand what every single state that is allowing remote work what their requirements are. And then they also have to think a little bit deeper in terms, especially from a marketing compliance standpoint, how do they put up those additional guardrails to ensure that the marketing is under control. And that LO is not necessarily out there going to their local baseball field and putting up a big ad, right? Or whatever it is. But it is those additional scary controls that, I always say, are what keeps you up at night? And a lot of times for a compliance person, it is just that fear of the unknown.

Rhonda:
So, I think that it is my biggest tip for folks is, again, hitting the reset button. Compliance folks, and marketing folks work together. We are in a new age of the way the business is being done. Compliance teams are a little bit smaller than they used to be. So there is a lot more work on their plates. It is just working together. And I think there is a way, there are ways that they can do these things. They can get some pre-approved content that can be easily disseminated without having to be ran through compliance. There is a lot of things that can be done, but you can put together some good best practices and really work in collaboration together. And I think we recently did blog on tips for effective collaboration between marketing and compliance teams.

Rhonda:
There are some really good nuggets in there. So I would definitely urge you, and you might wanna drop that one too for folks to see, but in the end, I always tell people let us face it, unlawful conduct is costly. You wanna make sure that you see your compliance team as the first line of defense. But I think the marketing team can be just as richly involved in that defense for the company and the brand because this is definitely not a day and age where anybody wants their brand to be tarnished. And you wanna know that you are trusted by those that are doing business with you, and you also wanna be able to not be sitting on the CFPB’s website because somebody is taking action against you. There is so many things that I really feel we have to just work together when you can make sure that you have technology to monitor that is where com PerformLine comes into play.

Rhonda:
We have the ability to discover and monitor so that you can act. There are so many things that can be done. It can be done affordably because I think it would be more affordable to pay for compliance technology than it would be to pay for fines. There are definitely things that we can do and we are here for you. We are your ally, so we can figure it all out together. But I think there is just a great opportunity for folks to, again, hit the reset button and pull in whatever you need, whatever armor you need to defend your brand.

Ashley:
Well, that was a perfect ending. I do not want to go any further. I think Rhonda wrapped it up perfectly. Fantastic, I will drop all those helpful resources, especially the marketing and compliance team collaborations blog in today’s show notes along with that social media checklist. Thank you so much, Rhonda. Any last remarks?

Rhonda:
I have nothing. I am looking forward to our next roundtable, which is in November. I’m just excited about the new faces that we continue to see as well as the old faces. And it is just been so rewarding to really build this compliance community because it feels like they are really taking off. So lots of friends were made at the last one and we are doing that virtually, imagine what we could do in person. Just really exciting times for us all.

Ashley:
Very cool. Very cool. Well, I’ll drop the registration link for the next roundtable in today’s show notes as well for you guys. And thank you Rhonda. Thank you for leading these roundtables. Thank you for chatting with me after that. We always appreciate it.

Ashley:
Thanks for listening to this episode of the COMPLY podcast. As you heard, there were several resources mentioned during today’s episode that I will drop for you in today’s show notes, including our social media compliance checklist for loan officer training and oversight, a blog on tips for effective collaboration between marketing and compliance teams, and our registration for our next COMPLY Mortgage Roundtable happening in November. As always, for the latest content on all things marketing compliance, you can head to content.performline.com. And for the most up-to-date pieces of industry news events and content, be sure to follow PerformLine on LinkedIn. Thanks again for listening, and we’ll see you next time!