Residential Magazine

Don’t Drown in a Flood of Paperwork

AI-powered technology can keep your head above water in a complex regulatory environment

By Kuldeep Saxena

Accurately gathering the large amount of information needed for a mortgage application and keeping that information secure has always been a challenge for the mortgage industry. Over time, that burden has only increased as forms got longer, more disclosures were added and more regulations were enacted at both the federal and state level.

The pace of new legislation has increased dramatically due to the COVID-19 pandemic and other factors meant to ensure data privacy and loan stability. Ensuring that the large amount of information gathered from loan applicants meets the needs of the regulatory environment and that all laws are adhered to is no easy task.

Using artificial intelligence (AI) can significantly reduce time spent in the mortgage process, giving originators more time to provide a human touch to their clients. With the Uniform Residential Loan Application (URLA), plus banking, employment, personal financial information and more, the amount of data can quickly become overwhelming.

In the not-so-distant past — and perhaps for some mortgage originators currently — this information would become a large paper file. Then, the data would be transferred to the loan processor and underwriters who may have used obsolete data entry systems that did not always adhere to new and existing regulations. This is changing rapidly with the rise of regulatory technology, also known as “regtech.” This technology is helping mortgage originators and lenders ensure that they meet increasingly complex regulations, adhere to compliance standards by lenders, adequately protect consumer information and considerably reduce data entry tasks.

Not only will regtech help mortgage originators, but lenders will also benefit from the technology. Credit monitoring tools can help with risk reduction and fraudulent activity. Additionally, using AI in the loan process helps comply with anti-money laundering rules, financial documentation and identity checks so that lenders can comply with regulations.

Reducing risk

Regtech is software that helps mortgage originators and companies comply with U.S. Department of Veterans Affairs and Federal Housing Administration regulations and the quality and security standards that apply to all real estate loans. Regtech can help simplify the process behind pre-approvals, applications, loan processing and underwriting, plus closing and post-loan compliance issues.

The power behind regtech comes from multiple resources, including cloud computing, AI and machine learning. It also comes from an understanding of data produced and gathered as clients fill out mortgage applications and related forms. This automated process sharply reduces the risk of errors and omissions while saving time for mortgage originators so they can concentrate on increasing their business.

As regtech software use has become widespread, the critical defect rate for mortgage loans has been declining overall during 2023. Regtech products automate the process of collecting and reporting data and work with Fannie Mae and Freddie Mac. Regtech can automatically fill and pull data from diverse sources, including loan origination systems, and populate forms, reducing errors and the need to repeat duplicate data entries multiple times.

The market for regtech software has grown from just over $4 billion in 2018 to just over $12 billion in 2023 and is expected to maintain that momentum. Regtech will help mortgage originators follow new and existing laws and regulations.

Changing landscape

In the past few years, the mortgage landscape has changed with the introduction of new federal, state and international laws designed to ensure the privacy of individuals and the stability of loans. Some of the regulations include:

  • TRID — The TILA-RESPA Integrated Disclosure (TRID) requires mortgage lenders and originators to ensure that borrowers have two special forms that detail the terms of the loans. These two forms are the loan estimate and the closing disclosure. The loan estimate must be given to the borrower within three days after receiving the loan application. The closing disclosure must be given to the borrower three business days before the loan is to be closed. Regtech helps originators comply with this rule with automation that generates the required information for these forms.
  • HMDA — The Home Mortgage Disclosure Act (HMDA) rule requires mortgage originators to collect information about borrowers, including credit score, debt-to-income ratio (DTI), age, property value and other information. Regtech can help by automating and automatically pulling data from loan origination systems and other sources.
  • General Data Protection Regulation — While the General Data Protection Regulation (GDPR) is primarily a privacy law for European Union citizens, it is important for U.S. originators in several aspects. Companies that do business in Europe must ensure that personal data, including names, addresses, email addresses, phone numbers and personal data is not shared with parties unauthorized to have access to personal data. Regtech software can scan databases and other sources to discover and identify personal data, then encrypt that data or remove it. While it might be thought that the GDPR is only for European companies, the rule applies to any business that works with Europeans. So, if a mortgage originator offers services to a person from the EU, they must follow the GDPR.
  • California Consumer Privacy Act — Similar to GDPR, the California Consumer Privacy Act (CCPA) is a more recent law, passed in 2018. The CCPA requires companies, including mortgage originators, to protect the personal data of the residents of California. Again, regtech can help originators comply with this rule by automating the process, identifying personal data and protecting the data. This data includes but is not limited to, names, addresses, email addresses and phone numbers.

In addition to these laws, there are several mortgage assistance and relief programs, some of which are the result of COVID-era relief programs. These include the CARES Act, passed in 2020, which provides mortgage assistance for homeowners who were affected by COVID; and the Homeowner Assistance Fund, passed in 2021, which helps people who have difficulty with their payments to catch up on past-due mortgage payments and learn about loan modification programs and refinance programs. When these consumers come to mortgage originators to purchase or refinance, regtech can help automate much of the paperwork needed.


AI-powered regtech software and solutions are increasingly used to help mortgage originators, underwriters, and others comply with complex regulations that are part of the mortgage industry. The software helps mortgage originators comply by collecting, reporting and protecting data, generating forms, gathering information from other forms and ensuring privacy. Regtech sharply reduces the chances for errors and omissions, lowers processing time and increases profitability by automating previously manual processes. ●


  • Kuldeep Saxena

    Kuldeep Saxena is a project manager who oversees mortgage and lending projects for Chetu, a global custom software solutions development and support services provider. Saxena, who has been working for more than 10 years at Chetu, has a master’s degree in computer applications and more than 15 years of experience in IT software.

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