10 Compliance Pitfalls Mortgage Brokers Should Avoid (And How to Fix Them)

Let’s face it—compliance isn’t the most thrilling topic. It’s not winning any Oscars, and it definitely won’t be trending on social media. But if you’re a mortgage broker, staying compliant is the difference between thriving and, well, trying to explain an audit over a lukewarm cup of coffee.

At Strategic Compliance Partners, we know compliance inside and out so you don’t have to. We’ve seen the most common (and costly) mistakes brokers make, and we’re here to help you avoid them.

Here are ten compliance pitfalls mortgage brokers stumble into—and how you can steer clear of them:

1. Not Keeping Up With Licensing Requirements

Mortgage licensing isn’t a “set it and forget it” deal. Requirements vary by state and change frequently. Miss a renewal deadline or fall out of compliance, and you could face hefty fines—or worse, a cease-and-desist order.

Fix It: Partner with a compliance expert (cough, us, cough) who monitors licensing requirements for you.

2. Ignoring Advertising Compliance

Key Compliance Activities for Mortgage Broker Owners

“Low rates! No fees! Guaranteed approval!”—sounds enticing, right? Too bad regulators don’t agree. Misleading ads can land you in hot water with the CFPB and state regulators.

Fix It: Ensure all marketing materials are compliant with state and federal regulations. And yes, that includes your website, social media, and email campaigns.

3. Weak AML (Anti-Money Laundering) Practices

Establish Marketing Strategies

If you’re not keeping an eye on suspicious transactions, the government sure will. Failing to maintain a strong AML program can lead to serious penalties and reputational damage.

Fix It: Have a rock-solid AML policy in place and make sure your team is trained on how to spot and report red flags.

4. Sloppy Record-Keeping

Review Your Advertising Protocols

Regulators love records. You? Maybe not so much. But disorganized or incomplete records can turn an audit into a nightmare.

Fix It: Keep detailed records of transactions, disclosures, and communications. Cloud-based storage solutions can help keep everything organized.

5. Failure to Conduct Background Checks

Provide required info

Hiring someone without properly vetting them? That’s a compliance time bomb waiting to go off.

Fix It: Conduct thorough background checks and NMLS screenings before onboarding employees and loan officers.

6. Not Training Your Team on Compliance

Staff Training

Your team can’t follow the rules if they don’t know what they are. A lack of compliance training can lead to serious (and avoidable) violations.

Fix It: Implement regular compliance training to keep your staff updated on regulations and best practices.

7. Overlooking State-Specific Regulations

Update Your Policies Regularly

Federal rules are just one piece of the puzzle. Each state has its own laws, and missing them could mean penalties—or even losing your license.

Fix It: Stay informed on state-specific compliance requirements. (Or, you know, let us handle it for you.)

8. Ignoring Fair Lending Requirements

How SCP Can Help with TRID Compliance

Discriminatory lending practices—intentional or not—can lead to severe penalties under the Fair Housing Act and Equal Credit Opportunity Act.

Fix It: Implement policies that ensure fair lending practices and conduct regular internal audits to identify disparities.

9. Failing to Handle Consumer Complaints Properly

respond quickly

Regulators take consumer complaints seriously—so should you. Ignoring or mishandling them can escalate into major issues.

Fix It: Have a formal complaint resolution process in place and ensure all complaints are documented and addressed promptly.

10. Not Working With a Compliance Partner

CFPB Audit

Trying to navigate compliance solo is like assembling IKEA furniture without the instructions—frustrating and potentially disastrous.

Fix It: Work with a compliance partner (ahem, that’s us) who understands mortgage regulations inside and out and keeps your brokerage protected.

Let’s Talk About Your Compliance Health

If any of these pitfalls sound familiar, don’t panic—we’ve got your back. At Strategic Compliance Partners, we help mortgage brokers stay compliant, avoid fines, and focus on what they do best: closing deals.

Give us a call at 301.578.6015 or click the button below to schedule a free compliance consultation. Let’s make sure your brokerage is protected from costly mistakes.

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About Ari Karen

Ari Karen is an experienced litigator who has focused his practice in representing financial institutions in both government investigations and litigation before state and federal trial and appellate courts nationwide. Mr. Karen’s practice is diverse, representing clients on matters concerning banking regulations, Dodd Frank financial reform laws, contractual disputes, employment and labor statutes, wage-hour class actions, employment discrimination and fair lending matters, whistleblower complaints and non-competition claims, among others.

Mr. Karen speaks regularly on topics affecting all types of lenders including fair lending and disparate impact, LO compensation, marketing service agreements, compliance with social media, non QM lending, vendor management, and much more. Mr. Karen is a principal in the Financial Institutions Regulatory and Labor and Employment practice groups of the Offit Kurman law firm.