Magazine article Mortgage Banking

The Advent of Mavent: An Irvine, California-Based Company Is Coming to the Rescue of Mortgage Lenders Everywhere That Are Struggling to Comply with a Mountain of New Laws and Regulations. Their Solution Is So Effective, Even Fannie Mae Is Using It

Magazine article Mortgage Banking

The Advent of Mavent: An Irvine, California-Based Company Is Coming to the Rescue of Mortgage Lenders Everywhere That Are Struggling to Comply with a Mountain of New Laws and Regulations. Their Solution Is So Effective, Even Fannie Mae Is Using It

Article excerpt

MAVEN: ma*ven or ma*vin; noun. A person who has special knowledge or experience; an expert. [??] In the world of loan compliance, that definition could apply to Irvine, California-based Mavent Inc., a provider of automated compliance services for the mortgage industry. [??] Mavent's name is a deliberate play on the Hebrew word "maven," says Tim Green, the company's founder and chief executive officer. "We basically manage what we refer to as an expert system [for mortgage compliance]," Green says. [??] Green, who also serves as chairman and director, laid the groundwork for Mavent in 1998, and the company was incorporated in February 2000. Today Mavent provides automated compliance services to several top-20 lenders, as well as to Fannie Mae. [??] The company's flagship product is the Mavent[R] Expert System, a rules-based engine that applies a model compliance decision-set to every loan in a client's pipeline or to entire pools of whole loans. The automated system submits loan data for reviews against nearly 300 legislative acts, 200 license types, and the rules and regulations of more than 60 regulatory authorities, according to the company. [??] Most of Mavent's lender clients are large and have multiple loan origination systems (LOSes), Green notes. "We typically connect to their LOS and take in loan data from all of their origination channels. We pull certain data elements from the systems at various points that are either status- or workflow-driven, and run a review," he says.

Mavent reviews 100 percent of its lender clients' loans, as opposed to a small sampling, he adds.

Green's experience in the legal, financial services and real estate fields led to his interest in automating compliance for mortgage companies. He holds a law degree from the University of Kentucky College of Law, Lexington, Kentucky. He's spent much of his 30-year career as the chief executive and chief operating officer of firms in the real estate and financial services industries.

Prior to starting Mavent, Green was senior vice president of operations in the real estate services division of Maryville, Tennessee-based Clayton Homes Inc., now a subsidiary of Omaha, Nebraska-based Berkshire Hathaway Inc. Green also served as president and chief operating officer of real estate investment company Clayton Williams and Sherwood Inc., Newport Beach, California. The company is now known as CWS Capital Partners LLC.

In his work within the real estate and finance fields, Green saw an obvious need for a more efficient approach to ensuring mortgage loans met all legal and regulatory requirements--a function performed manually by humans until fairly recently.

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"I don't know if there was any 'a-ha moment.' But over the years I saw more and more regulations for financial institutions pile up," he says.

Green was also influenced in the mid-1990s by Philip Howard's book, Death of Common Sense: How Law Is Suffocating America. "It's about the explosion of regulatory law in America. When I went to law school back in the 1970s, I had a couple of tax courses and administrative law courses. But there weren't all these mounds and mounds of regulation you have today," he says.

As the regulation of financial institutions became more complex in the 1980s and 1990s, Green watched a parallel explosion in computerization and automation, he says.

Automating the compliance review of mortgage loans seemed like a logical step. "I would visit mortgage operations and see spreadsheets or charts on the walls. Across the top would be a list of states, and then down the side would be the fees that you could charge for a loan in each state. People were using these little spreadsheets or matrices to figure out what was appropriate to charge in each jurisdiction," Green says.

"That kind of turned on a light in my head--that's the type of process that can clearly benefit from computerization," he says. Green began by working to build a database of legal rules.

In 2001, Mavent signed its first customer, Novato, California-based GreenPoint Mortgage Funding Inc., and built a system that reviewed 100 percent of GreenPoint's originations. "Since that system went up in 2002, [GreenPoint] has originated close to three-quarters of a million loans. They've not received one back with a compliance issue," Green says. "It shows you what the ROI [return on investment] is," he says.

Signing GreenPoint Mortgage as a client allowed Mavent to take its concept to the capital markets and raise money there, Green says. In 2003, San Francisco-based Financial Technology (FT) Ventures was Mavent's first institutional investor. "We've done two rounds of investment with them," he says.

Mavent now boasts more than 20 clients, including Cleveland-based National City Corporation; San Jose, California-based First Franklin Financial Corporation; Cleveland-based Ohio Savings Bank FSB; West Palm Beach, Florida-based Ocwen Financial Corporation; Charlotte, North Carolina-based Lending Tree LLC; and New York-based Credit Suisse First Boston. Mavent signed Fannie Mae, its biggest client to date, in October 2005.

Mavent's clients range in size, but the company typically focuses on institutions originating $30 billion or more a year, Green says.

No spilled coffee on the files

Today Mavent's automated system reviews a loan file in two to three seconds, Green says. He estimates it would take an attorney specializing in financial services regulation roughly an hour and a half to review the same file. "That's if the loan were in a jurisdiction with which the attorney was familiar with and if it were a product with which he was familiar. An attorney could probably do five or six loan files a day without going crazy," Green says.

Automating the review of loans also ensures consistency, which isn't always the case with manual reviews, Green adds. "We don't have to worry about spilling coffee on that loan file. We don't have to worry about a distracting phone call. We don't have to worry about mixing up a 10 with a 01," he says.

The company has grown from a handful of employees to 60 people today at its Irvine headquarters. They include nine attorneys, most of whom work on maintaining Mavent's database and rule set, says Green.

The company also maintains a network of outside attorneys and law firms to keep abreast of current laws around the country. These include Linthicum, Maryland-based Hudson Cook LLP and Pittsburgh-based Reed Smith. "We have a large network of firms, both national and local, who supply us [with] data regularly so we can keep our rule set current," Green says.

The explosion of regulations in the mortgage business has been a boon to Mavent, Green notes. "When we started to build our initial proof-of-concept site, the state of North Carolina hadn't passed the very first state high-cost [lending] law yet. Now there are more than 30 states with high-cost laws and numerous municipal laws. So [lending regulation] has not only gotten complex, it's gotten painfully complex," he says.

A giant legal brain

Crucial to Mavent's success is the extensive data warehouse it maintains on financial regulations and laws.

Lynette Hotchkiss, senior vice president and senior legal counsel, heads a team of seven attorneys that maintains and updates the database. Prior to joining Mavent in late 2002, Hotchkiss practiced business law for various real estate and lending firms, including stints as legal compliance expert and counsel at Portland, Oregon-based CFI ProServices Inc., and law firms Hudson Cook and Reed Smith.

Mavent has built a database for mortgage regulation and compliance unmatched by any other company, according to Hotchkiss. "We take the minds of the best consumer finance attorneys in the country, and we download them into a computer," she says. "They're out there with their feet on the street and eyes on the road watching all the new legislation." Mavent's in-house legal team then works to code new laws and regulations into rules maintained in its database, Hotchkiss says.

"I like to think we've built this super-legal brain that never forgets. There are so many laws out there, so many nuances of laws and regulations, that it's difficult for a human to keep up with everything," Hotchkiss adds.

Mavent's legal rules are identified and explained in about 7,000 pages of detailed legal rules documentation, she notes.

The company's review functions include: loan-level lender and broker license reviews; state consumer-credit laws relating to such terms as usury, fee restrictions, prepayment penalties and late fees; Home Mortgage Disclosure Act (HMDA); and Truth in Lending Act. Mavent's system also reviews for investor program requirements, such as an accurate Fannie Mae points-and-fees threshold test.

If no problems are discovered in a review, Mavent archives the loan review for the lender, and lets it know a review was run, what data were used and that there were no problems.

"If there is an exception, it pops up on the screen for the user. The user can correct it right then or correct it in their workflow process at a later time," Green says. "But if [the] user gets to the point where they're getting ready to draw docs, [the system] won't draw docs unless all errors are corrected."

In the past, prior to automated review systems, lenders would typically perform a quality-control (QC) review on closed loans, either by an internal QC department or by a due-diligence company, Hotchkiss says. "Many companies are still doing things that way. They QC the loans and discover what's already been done wrong," she says.

Because Mavent performs multiple reviews of loans from the start of the loan process, compliance issues are caught upfront, Hotchkiss says. "We stop them from making any non-compliant loans before they're funded. You're not saying, 'OK, we made that mistake, what refunds do we have to do, how do we make this right?'"

Mavent's ability to review a loan within seconds allows it to review 100 percent of a lender's portfolio, not just a sampling, which is typical for the QC approach. "You're not just getting that 1 percent to 10 percent sample at the end, and wondering if a non-compliant loan is indicative of a more significant problem generally in the entire portfolio," she says.

Mavent's products are backed by a warranty, Hotchkiss adds. Mavent "contractually indemnifies clients against losses arising from fines and penalties, as well as civil judgments, assessed on loans for regulatory violations associated with reviews performed by the Mavent Expert System. Mavent's indemnity effectively provides coverage for risk that cannot otherwise be insured by the [lender client]," according to the company.

The Mavent indemnity is backed by Oldwick, New Jersey-based A.M. Best Co. A-rated carriers. "If our application of one of our rules causes you a problem, we'll stand behind it," Hotchkiss says. But, she adds, "it's never happened."

Automating the mundane

Mavent's attorneys do not practice law for their lender clients, stresses Michael Benoit, the company's executive vice president and chief legal officer. "We don't tell customers what they need to do to comply with the law. We test their data against our rules database, and we tell them whether or not it complies with our rules database," he says.

If a lender client needs help interpreting a law, Mavent refers the lender to the lender's own in-house or outside counsel, Benoit says.

Benoit was recruited from Hudson Cook, where he was a partner and practiced consumer finance law for eight years.

Mavent's system frees lenders' internal legal and compliance staff to focus on other issues, Benoit notes. "We take the mundane, garden-variety compliance activities and we automate them, which creates efficiencies within the lender's [compliance] group. It allows those groups, which have been always populated with talented and highly educated folks, to expend their energies on things that really do require a human mind," he says.

Mavent has designed its system so individual lenders can make exceptions to its rules, Benoit says. "We tend to take fairly conservative positions that everyone can agree are compliant. Then we allow our customers, on a one-off basis, to make adjustments to our rules database if they are of the opinion that they can legally take a position that's more aggressive than one our rules database takes," he says.

Client exceptions, as they are referred to, are not covered by Mavent's warranty, Benoit adds.

Mavent's system works well not just for lenders, but also for investors in mortgage loans, he notes. "It's a very valuable tool for due-diligence purposes, for reviewing seasoned loans and trying to evaluate what you have. One of the neat things about the system is that we archive all our rules back to 1999. So you can run a pool of seasoned loans and the system will apply the law that was in effect at the appropriate time," Benoit says.

"Even if you're running a review today, if the loan is three years old it's going to run against the rule set that was in effect three years ago. It would be a nightmare for a human to keep track of all that," Benoit says.

Elegant yet simple technology

The driving force behind Mavent's technology is Ed Stevens, its chief information officer. Stevens brings a long history of working with startup companies and technological innovations.

As a senior executive, Stevens was pivotal to the growth of Piano, Texas-based Electronic Data Systems (EDS), as well as Plano-based Perot Systems Corporation, the company founded by former presidential candidate H. Ross Perot. Stevens helped turn both companies into multibillion-dollar corporations. He also spent eight years as a senior vice president with ALLTEL Information Services Inc., Little Rock, Arkansas. Stevens joined Mavent in 2003.

Mavent's technology is "a big piece [of the company's success] because it allows us to deliver our services in a very-high-quality, business- and customer-responsive mode. As more and more of the industry moves overseas, it becomes critical for availability to be 24 [hours by] seven [days a week] by 52 [weeks a year]," Stevens says.

While Green describes Mavent's technology as "elegant," Stevens likes to refer to it as "simple."

"I'm a firm believer in the KISS [keep it simple, stupid] method," Stevens says. "When you've been in the industry as long as I've been, you see many evolutions take place. The one constant in life is change. The development of an environment that allows flexibility and change is crucial," he says.

And that's what Mavent's technology does from an architectural standpoint, he says. "Our technology allows change to take place by not totally eliminating investments we've made previously, but to play off those investments as much as we can through some co-integration process," Stevens says.

While service-oriented architecture (SOA) is a popular term today, Stevens believes its concepts have been around for some time.

"The buzzword today is SOA, but if you really sit down and look at the principles of SOA, they're not dissimilar from the principles that existed in the 1970s and 1980s. What's different is that technology has evolved and become more sophisticated--not only in the delivery platform from a hardware communications standpoint, but also from a software standpoint. It allows these integrations to happen a little bit more rapidly and a little bit more seamlessly," Stevens says.

Selling lenders on automation

Persuading lenders, especially very large financial institutions, to let an outside company handle some or most of their compliance hasn't always been easy, Green says. "When we started, the concept of outsourcing a legal process was taboo. First we had to create an awareness of the need [for automating compliance]," he says.

External forces in the industry helped, Green notes. There were several large judgments against financial institutions for making non-compliant loans in the 1990s. New regulations at the local, state and federal levels continued to crop up in the late 1990s and early 2000s.

"When I bought my first home, I bought it with a loan from the local S & L [savings-and-loan] where I deposited my money," Green says. "It was a bank in the same county, on a property down the street. We've evolved to the point where a person is borrowing on the Internet from an institution in Florida to finance a second home in Oklahoma, and the borrower works and has a primary residence in California," he says.

That represents a huge shift "from even 20 years ago," Green says. "The route of money from investor to lender to borrower has picked up speed. Anything that can be made more mechanical, more reliable, more repetitious, that [also] creates enhanced accuracy and speed, adds to profit," he says.

Mavent executives maintain they have no direct competitors, although others might certainly dispute that. "I don't believe there's another company out there that covers as wide a scope as Mavent does," Green contends.

Other compliance companies in the financial services industry cover some of the areas Mavent does, but not all, explains Louis Pizante, senior vice president, sales and marketing. "Like a Venn diagram, there's some overlap," he says. "We'll compete in some areas, like high-cost or truth-in-lending, but nobody does everything that we do," he maintains.

In-house competition

Often Mavent's biggest competition comes not from other compliance companies, but from within the lenders' own shop, says Stevens. "The industry as a whole fully understands and accepts the challenges they have in risk mitigation and challenges with regulatory issues," Stevens says. "I think what they struggle with, is 'Why can't we do this ourselves?'"

Large lenders already have a sizable in-house legal staff, extensive relationships with outside counsel, and their own information technology (IT) staff, Stevens notes. "CEOs look at all that and figure they ought to be able to [perform compliance reviews] themselves in-house. So [persuading them to use Mavent] can be a difficult sale," he says.

"But it's no different than the difficult sale we had in the 1970s when we first started computer outsourcing at EDS," Stevens adds. "You've got to help them understand that their internal organizations are pretty much overworked today with what they've got on their plate. Plus, you're asking them to do something that they don't necessarily have all the background and expertise they need [to do]," he says.

Many times, what ultimately sells lending executives on Mavent is a pilot of what its services can provide, Green says. "We tell [a lender] to send us a month's worth of their production and we give them the results. We show what it looked like before, and what it looked like after it had been reviewed by us. In the end, that pilot is what's often made the difference [in deciding to use Mavent]," he says.

The cost and value of compliance

The long-term cost of outsourcing compliance and risk mitigation is actually less than the cost of performing those tasks in-house, Stevens believes.

Mavent charges based on a cost per loan, but executives are hesitant to divulge pricing information. "We're a very customized provider," says Pizante. Pricing depends on the deployment and scope of the review, but "it would be difficult to give a general range of prices," he says.

"It's less than a courier fee," Pizante adds.

Pizante says, "I don't think we're ever replacing a compliance department. For large institutions, we leverage their internal expertise. For smaller institutions, we provide them with something that they cannot otherwise afford."

Mavent has been successful in part "because it has been able to provide cost efficiencies that make it difficult for institutions of any size to justify maintaining and developing an internal system," Pizante says.

And the cost efficiencies for a large originator are big, Pizante says. "Our clients are large institutions with a substantial amount of resources and a very sophisticated expertise. The fact that they're relying on Mavent shows that there are material cost efficiencies. These are people that could definitely do it on their own, and they're not," he says.

Adds Benoit, "Our clients can honestly say they spent $3,000 on reviews that would have cost $40,000 to fix. That's a big deal," he says.

What's more difficult to measure is the value of avoiding lawsuits or negative publicity, says Scott McNulla, Mavent's senior vice president, client support. "One bad loan could be the black eye your firm has to face," he says.

"What's it worth to never see a negative headline in The Wall Street Journal about your publicly traded company? It's worth more than any curative action [a lender] would ever have to take," he says.

While it's a relatively new business, Pizante sees automated compliance solutions gaining adoption in coming years. "Three years ago, automating compliance was an interesting concept that institutions were exploring to determine whether it could drive cost efficiencies. Today automated compliance is a business requirement. Any institution that doesn't have an automated compliance function, whether it's third-party or internal, is exposing itself to inexcusable risk," Pizante says.

A new approach to managing compliance risk

Mavent has something of a unique approach, Pizante says. "Most companies with some sort of compliance offering think of compliance as a defensive function that stops you from making too much money. It stops you from charging fees where you're not supposed to, and stops you from having loan terms that result in more cash flow to the holder of the note," he says. That approach looks at compliance "as a defensive, belt-and-suspenders type of function."

Mavent takes a different view. "We are regulatory-risk managers. We make sure that our clients are originating profitable loans that are in compliance with the law," he says.

Compliance risk differs from other types of risk in the mortgage business because it is more black-and-white, Pizante adds. "Unlike credit risk or collateral risk, there's no tolerable level of breaking the law. In those areas, our clients are assured that we're taking conservative positions and they're protected," he says.

What sets Mavent apart is its ability to apply the right law to each specific client institution and to individual transactions.

Pizante adds, "It's a question of precision. Are you making simplifying assumptions that are causing your clients to leave money on the table? Or are you precise in making sure your clients are originating the most profitable loans that they're permitted to under law?"

Winning over Fannie Mae

Landing Fannie Mae as a client last fall helped win valuable recognition for the company, Mavent executives say.

Mavent began working and negotiating with Fannie Mae in 2004, and the secondary-market agency signed a contract in October 2005, according to Benoit. "Fannie Mae did a significant amount of due diligence on us and our rules database. They chose us. That's just huge," Benoit says.

Mavent's relationship with Fannie Mae is twofold, Pizante says. "Fannie Mae uses Mavent to [do due diligence on] loans it has purchased for regulatory violations," he says. If a Mavent review finds a violation or problem on a loan, Fannie Mae can put the loan back to the seller/servicer, he notes.

In addition, Fannie Mae has given its customers access to Mavent through the Fannie Mae Service Provider network, Pizante says. This way Mavent reviews are available on a real-time basis via an integration with a lender's loan origination system, he says.

"Their clients can run a review prior to funding and closing to ensure that a loan is compliant and sellable to Fannie Mae," Pizante says.

While declining to discuss specific pricing, Fannie Mae seller/servicers accessing Mavent through Fannie Mae "get a nice deal," according to Pizante.

Expanding to the front end?

Going forward, Green envisions Mavent expanding the services it provides to lenders to include lending strategy and "suitability" analytics. An increasing number of state and local anti-abusive-lending statutes are requiring lenders to assess whether a loan is "suitable" for a borrower before closing the loan.

"Our services keep our customers from making mistakes or incurring liability. The same databases can be turned front-facing to increase lenders' revenue opportunity, decrease their expenses [and] move into the production and opportunity side of the house," Green says.

Mavent is now working with half a dozen of its lender clients on providing some sort of suitability analytics or, specifically, determining the best mortgage products for applicants. Much of the data that Mavent already gathers from lenders, such as credit-related information and demographic data, can be used to predict what loans various borrower categories are most likely to seek, Green says. "It's taking what we do and refocusing it slightly," he says.

"We have the capability to tell companies what products the customer wants to buy. We've got the customer at the point of sale, at the very time that's most important to the lender. If we can tell our client what the customer wants to buy, the pull-through rate is increased. The chance the customer may go shop down the street is decreased," Green says.

As the mortgage industry has grown more complex with the proliferation of both products and regulatory requirements, it's become more difficult for lenders to match the right product to the borrower, Pizante says. "It's also harder to make sure the asset they're originating is both compliant and profitable," he adds. "That's a place where automation can definitely help."

Selling lenders on that sort of service may be easier than on automated compliance reviews, Green notes. "If you can decrease the number of customers lenders lose, there's certainly a real dollar value they can identify--where-as [with] compliance, it's sort of like if you have an insurance policy and you don't have a wreck. What was your return on that policy? It's hard to figure out what your return is until you have a wreck," Green says.

The early years

As the father of six children, Green has applied many of the principles of raising a large family to starting a business from scratch. "It isn't all sunny days. There are some hard times and sleepless nights," Green says of both endeavors.

The early years of Mavent as a company "were very lean," he says. The capital for starting Mavent was a patchwork of personal savings, borrowed money and investments by business associates, Green says.

"You have wives working a couple of extra jobs, you sell a house you weren't planning to ever sell--doing those types of things to draw money. Then you have friends who you've worked with for years who help put money into the business," he says.

"You have to be able to withstand an awful lot of stuff that I never had a true understanding of until now," Green says.

What other comparisons can Green draw between raising six children and starting his own company? "Raising six kids prepares you for a lot. I guess the best analogy I can make relates to the concept of incidence and severity, like in the insurance business. With younger children you have all sorts of problems, but none of them are that severe. As they get older, the problems aren't that often, but when there is a problem, they tend to be more severe," Green says.

Building a company "seems to be a little bit that way. I don't have a big enough window yet to say if it's totally accurate or not. But it seems as we've grown and matured as a company, we don't have as many little day-to-day problems--but the challenges we have are a little more important. And the things that used to drive me nutty seem pretty routine today," Green says.

Mary McGarity is a freelance writer based in Trumbull, Connecticut. She can be reached at mmcgarity_1@charter.net.

RELATED ARTICLE: Integration Nuts and Bolts

Because it's a customized service, a big part of Irvine, California-based Mavent Inc.'s solution involves integrating with each lender's loan origination systems (LOSes), according to Scott McNulla, senior vice president, client support.

Prior to joining Mavent, McNulla held management positions in operations and servicing, as well as systems integration for several lending institutions, including Countrywide Financial Corporation, Calabasas, California; and Downey Savings and Loan, Newport Beach, California.

Mavent offers lenders multiple delivery platforms, McNulla says. "There's a direct input channel where the lender logs onto a Web UI [user interface] and enters data and submits reviews. It's basically a stand-alone application," he says.

Or lenders can opt for either a partial batch integration or a full end-to-end implementation from within their LOS or other tracking system, McNulla says.

"We have a suite of compliance reviews we offer, but the implementation is customized. The larger the lender, the more customization they're likely to want," he says.

Part of client integration involves helping lenders decide when to set the trigger points for a Mavent review, McNulla says.

"It really depends on the workflow of the lender, so you need to spend time with their business users and get an understanding of how their LOS operates," he says. Understanding the workflows for each specific lender helps identify where the most appropriate trigger points are to get the best value from interacting with Mavent's system, McNulla says.

Review triggers usually vary by origination channel, McNulla adds. "The average life cycle of a retail loan might be 40 days from application until funding. For wholesale, the lender may only have it on their system for a few weeks, because by the time they've received the loan from the broker, he's already done a lot of the preprocessing. Correspondent loans--either flow or bulk delivery--may only be on the lender's system for two hours. They get the closed-loan file, they input the data, and they're ready to fund the same day they got the information," he says.

The number of reviews performed on a loan range from one or two reviews for a correspondent loan to six or seven reviews for a retail loan, McNulla says. Any errors caught or changes made to the loan generally increase the number of reviews, he says.

A key trigger point is typically right before loan documents are drawn, he notes. "You want to know before you create that loan package to send to the customer that you do in fact have a compliant loan," McNulla says.

Another important review usually takes place right before funding, he says. "Even though you'd rather catch an issue before the loan docs go out, you still have an opportunity to catch it and resolve it if the money hasn't left the building and you haven't funded the loan," he says.

"One hundred percent of a lender's loans are reviewed with a consistent measurement. You don't have one reviewer who's a little more stringent and then another who's a little more loose reviewing the same loan file and coming up with different results. It's always consistent," he says.

Part of Mavent's appeal lies in the company's willingness to work with lenders as they transition to a new LOS, McNulla notes. "There's a lot of lenders who want new LOS systems now," he says. "In the interim, they don't want to ignore compliance for the next two to three years as they move through the selection and the implementation process of a new system."

As lenders move to a new system, Mavent can help identify "where they have holes or issues that need to be resolved, so they don't duplicate those as they move onto the new system."

RELATED ARTICLE: Working with Mavent-National City

Irvine, California-based Mavent Inc.'s system has become a cornerstone tool in Cleveland-based National City Corporation's compliance process, according to Jack Konyk, senior vice president, regulatory and compliance manager, consumer finance, with National City Corporation's Pittsburgh office.

National City began using Mavent's automated solutions in 2003, and continues to work on integrating the automation into its various lending entities and multiple loan origination systems (LOSes), Konyk says.

"We operate multiple lending entities on different systems, so integration has been a challenge. In fact, we're still integrating some of our units. But the Mavent system is fully operational and integrated with National City Mortgage's LOS," Konyk says.

Mavent's automated system "gives us an opportunity to look at literally every loan we touch," Konyk says. It would be impossible to review 100 percent of loans using a manual compliance system, he says. "No matter what kind of manual system you use, you're doing some kind of sampling," Konyk says.

"The beauty of an automated system like Mavent's is that it looks at 100 percent of the files as they go through the process. It identifies errors that may be missed in a sampling program," Konyk says.

Using Mavent's automated system for compliance allows National City to use its human resources in more productive ways, "rather than devote a whole lot of them to routine functional audits in the normal monitoring process. The computer can test an APR [annual percentage rate]; the computer can test whether things are calculated correctly. All that ... used to require human assets," Konyk says.

National City has selected certain critical points in the life of a loan to trigger a Mavent review, he notes. "When the processor gets to those points, those tests will run in the background, and if there's a problem with the file, the system will bring it to their attention right away," he says.

National City has set the Mavent system to run an initial set of tests when a loan first hits its system, Konyk says. Other trigger points for a Mavent review include submission to underwriting, document requests, funding requests and application denials.

"Clearly, the purpose of the system is to catch errors before the loan goes to funding. Every time we get an error message and somebody has to correct it, that's an error that quite possibly would have lived until an auditor discovered it after closing," Konyk says.

The Mavent system also serves as a training tool for processors, Konyk says. "We have our LOS interactively programmed [with Mavent's system], so we're doing testing in the background as the processors are going through the loan files. If there's an error of enough severity, we actually have the LOS stop and force the error to be corrected before the processor can move along," Konyk says.

"For us, this is a great additional bolster to our training efforts, because someone who's about to make a mistake gets feedback immediately," he says.

Has National City been able to quantify the return on investment (ROI) that Mavent's services bring? "It's extremely difficult in a real, tangible sense [to measure ROI]. A lot of the return on investment you get tends to be intangible. You can't really quantify that until you've got several years of solid operating experience behind you and you look at things you've avoided, and the frequency of error that you don't see anymore," Konyk says.

Mavent is one of a host of tools National City uses for compliance, Konyk says. "We still sample files, and do audits," he says. And some part of compliance will always require looking at the file itself, according to Konyk. "You still need to look for alterations in documents, to look for all kinds of things that you really need a pair of eyes to see," he says.

But, Konyk adds, "For what a computer system can test, Mavent's system is very complete, it's very thorough, and it looks at 100 percent of my files as they go through the process. To me, that kind of real-time oversight is invaluable."

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