How Mortgage Companies Have Been Impacted by the Pandemic

This piece originally appeared in the August 2023 edition of MortgagePoint magazine.

Rob Nunziata is the Co-Founder and CEO of ActiveComply, a provider of cloud-based solutions that help companies in highly regulated industries stay compliant. He is also the Co-CEO of Orlando, Florida-based FBC Mortgage LLC, one of the nation’s largest retail home lenders. Before joining FBC more than 17 years ago, he worked at First Horizon National Corp. Nunziata majored in business, finance, and marketing at the University of Florida’s Washington College of Business. Contact Nunziata at [email protected].

Q: Why is any compliance monitoring needed for employees who want to work from home?
The biggest reason is the fact that the mortgage industry has become much more heavily regulated since the 2008 financial crisis. Depending on where they do business, lenders must meet a variety of federal and state requirements regarding what their employees can and cannot do—requirements that involve everything from marketing to how sensitive consumer data is handled.

In addition, lenders need to ensure their employees have safe and compliant working conditions wherever they work, including at home. These requirements apply whether employees are working in the office or from home, but monitoring employees for compliance is obviously much harder if they’re not in a company’s offices.

The other reason is that lenders and servicers with employees who started working remotely during the pandemic are now being held accountable to agencies and regulators, so monitoring is not an option.

Q: How did the pandemic change things?
Almost overnight, real estate finance firms had many or all of their employees transition from their offices to working from home. In the meantime, many states lifted rules and guidelines that would normally prevent mortgage companies from operating entirely remotely. Since then, a number of states have enacted regulations that enable originators and servicers to use remote workers permanently. Many mortgage companies now offer remote work as a perk, which enables them to recruit from a larger pool of talent.

Q: What challenges did this present to lenders?
There were multiple challenges. For starters, mortgage companies had to figure out if their employees’ network access was secure and if they had adequate internet speeds to perform their jobs unimpeded. They also had to make sure that the remote employees were complying with agency and government guidelines, requirements and regulations, especially those regarding customer privacy. For example, if an employee is working with borrower data, they shouldn’t be using an at-home printer or working from a public library where others may have access to that information. Most lenders have no idea whether their employees are doing these things unless they have the right tools in place.

Q: What precedent did mortgage employers have to draw on when they made the widespread shift to work-from-home models?
There really wasn’t any precedent. It’s important to understand that the vast majority of mortgage industry professionals, like most Americans, had never experienced working from home. Until recently, working from home was something you could only do if you were a freelancer or a consultant. For the past 60 years, people have primarily commuted to offices, retail stores, manufacturing facilities, or other locations. When 2020 hit, suddenly you had practically the entire industry working from home at once. It was a huge shift that happened so fast that regulators are only now beginning to catch up.

In fact, the “rulebook” for having remote employees is still being written. For instance, the MBA recently created proposed model legislation to help individual states make the flexibility they offered lenders during the pandemic permanent. The trade group also expects regulators will eventually require lenders to keep lists of all their remote employees as well as the hardware they’re using and a security log of remote logins. There are no precedents for any of these things.

Q: How can mortgage companies efficiently address all of these concerns without the travel expense associated with recurring on-site inspections?
Thankfully, recent technological advancements have made it possible for companies to perform inspections of an employee’s home office or their branch offices remotely. Through tools such as the geo-tracking function on the employee’s own phone, remote verification of the employee’s IP address and internet connection speed, and secure video technology combined with employee input, mortgage organizations can confidently confirm that their team members are safe and working in a compliant manner, no matter where they are.

In addition to helping lenders stay compliant, remote inspection technology enables lenders to continue to safely recruit and maintain a distributed workforce, which helps bring their overall operating costs down. At a time when every lender is looking to trim costs to offset the impact of higher rates on their loan volume, that’s an enormous advantage.

Q: How does the need for verification of work-from-home staff vary between mortgage lenders and other companies?
Every company that operates a remote workforce needs to monitor what their employees do, but we have found the most demand for remote office inspections comes from the most highly regulated industries.

So, mortgage companies, real estate firms, banks, wealth managers, and other financial service providers are most interested in the services we are offering.

In the mortgage industry alone, the rules about what employees can and cannot do are so specific that they’re often taken for granted. For example, if you have someone working with an FHA borrower from their home office, HUD policies demand that the employee’s computer screen not be visible to anyone else in order to keep the borrower’s data safe. With the right technology, lenders no longer have to take an employee’s word that these things aren’t happening—they’re able to know for sure.