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Let’s face it: the word “audit” might make you break into a cold sweat. But what if we told you that with the right preparation, audits don’t have to feel like a horror show? In fact, they can be a smooth, painless process that you pass with flying colors. Whether you’re a seasoned mortgage broker or just starting out, keeping your business audit-ready is crucial for staying compliant and avoiding unnecessary fines.
At Strategic Compliance Partners (SCP), we specialize in guiding mortgage brokers through the maze of compliance and audits. In this blog, we’ll share 14 must-have documents, tools, and best practices to ensure that your business is always ready for the spotlight—without the stress. Ready? Let’s dive in.
1. Up-to-Date NMLS License
Your NMLS (Nationwide Mortgage Licensing System) license is your golden ticket to operating as a mortgage broker. Ensure that it’s current, renewed, and compliant with both federal and state regulations. Missing an update could result in hefty fines or worse—an audit trigger.
Pro Tip: Set a calendar reminder for license renewals at least 30 days before the due date. It’s an easy step that can save you from scrambling when the clock runs out.
2. Complete Loan Files
Every audit will require you to show documentation related to the loans you’ve originated. A complete file includes the application, credit report, appraisal, underwriting decision, and closing documents. Think of it as the backbone of your audit preparation.
3. Clear Record of Loan Disclosures
Loan disclosures (like the Loan Estimate and Closing Disclosure) are crucial to demonstrating that you’ve informed borrowers properly and met all regulatory requirements. Ensure these documents are signed, dated, and stored for easy retrieval.
4. Compliance With Fair Lending Laws
If you’ve ever thought about skimming over the Equal Credit Opportunity Act (ECOA), think again. Be prepared to demonstrate that your lending practices are fair, transparent, and non-discriminatory.
5. Proof of Borrower Eligibility
For every loan, ensure that you have documentation proving the borrower’s eligibility. This might include income verification, tax returns, or employment history. These documents will help you demonstrate that the borrower met your lending criteria.
6. Loan Origination Agreements
You’ll need clear records of your loan origination agreements, which outline the terms between you and your borrowers. This ensures transparency and accountability in your transactions, which is key to avoiding audit red flags.
7. Internal Audit Logs
A proactive internal audit process is a great way to catch potential issues before an external auditor does. Keep logs of all internal audits, corrections made, and any compliance issues identified.
Actionable Takeaway: Perform regular self-audits to ensure everything is up to snuff. This will keep you ahead of any potential regulatory problems.
8. Training Records
A well-trained team is your best defense against compliance mistakes. Keep detailed records of training sessions, certifications, and continuing education. These logs will demonstrate that you’re committed to staying compliant and informed about the latest regulations.
9. Detailed Compensation Records
Compensation practices need to be transparent and compliant with the Loan Originator Compensation Rule. Be prepared to show records of how your team’s compensation is structured to avoid conflicts of interest or unethical behavior.
10. Third-Party Vendor Agreements
You’ll need to prove that any third-party vendors you work with—such as appraisers, title companies, or underwriters—are also compliant. Keep copies of these agreements and vendor compliance records.
11. Anti-Money Laundering (AML) Documentation
For your audit, you’ll need to demonstrate that you have AML policies in place. This includes maintaining a Suspicious Activity Report (SAR) log and keeping records of your efforts to prevent money laundering and other illicit activities.
12. Marketing Materials Compliance
Any marketing materials (brochures, websites, ads) need to be compliant with advertising regulations. Be prepared to show records of all advertising and promotional content, ensuring they align with fair lending and truthful advertising laws.
Real-World Scenario: One broker came to us after receiving an audit request for their marketing materials. SCP reviewed their content, made adjustments, and they were able to pass the audit with ease.
13. Loan-Level Data
Loan-level data helps to track all transactions from application to closure. This can be an invaluable asset in an audit, as it provides a detailed record of each loan you’ve handled.
14. Compliance Officer On Hand
If you’re a larger brokerage, having a designated compliance officer can make audits much smoother. This person is responsible for overseeing compliance across the board and serving as a point of contact during audits.
Pro Tip: Consider appointing a compliance officer if you don’t already have one. This role can help you streamline compliance processes and keep your audit preparation on track.
How SCP Can Help You Ace Your Next Audit
At SCP, we’re not just about keeping you compliant—we’re about making compliance easy and stress-free. We specialize in helping mortgage brokers like you prepare for audits, renew licenses, and navigate the ever-changing landscape of financial regulations.
Whether you’re in need of comprehensive audit preparation, licensing assistance, or ongoing compliance support, our team is here to guide you every step of the way. Let us take the guesswork out of your compliance needs so you can focus on growing your business.
Need help getting audit-ready? Call us today at 301.578.6015, email us at sales@strategiccompliancepartners.com, or visit our Compliance Services Overview for more details.
What’s your biggest audit concern? Let us know in the comments below, and we’ll help you tackle it!
