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The defi Team Community Banking, Compliance, defi INSIGHT, Servicing Systems

loan servicing compliance


Loan servicing compliance is one of the most important things community bankers think about when they manage their loan portfolios. Yet providing competitive loans to borrowers and managing them well is only one part of the process. You also must ensure that you’re following all federal and state regulations like the Equal Credit Opportunity Act and the Fair Debt Collection Practices Act.


With so many compliance standards to follow, it can be hard to keep up with the latest best practices. If you want to improve your system, here are a few loan servicing compliance must-haves that your community bank should focus on this year.


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5 Loan Servicing Compliance Must-Haves for Banks

Streamlining the loan servicing compliance process is essential for community banks. That’s because many bankers must expend a great deal of time, energy, and resources just to stay compliant every year. The more inefficient your compliance processes, the more time and money you’ll waste trying to maintain and update them.


This year, consider upgrading to a more efficient and cost-effective system or to outsourced services that help with your loan servicing compliance. Here are five must-haves to consider:


  1. Key Performance Indicators (KPIs) for compliance;
  2. Loan servicing checklists;
  3. Loan servicing automation;
  4. Professional, reliable collections and call center agents;
  5. An extensive and configurable loan service system.


This list is by no means comprehensive, but it’s a great place to start if you’ve been thinking about improving the way you handle loan servicing compliance at your community bank. To make the most of these compliance best practices, you should also think carefully about how to incorporate them into your existing system.

How to Use These Five Must-Have Services and Tools

The best loan servicing compliance processes include specific rules for every situation. Community bankers should automate as much as they can to reduce errors and save time and money. How can community bankers accomplish all of this? Start by considering these five important steps:

Establish Loan Servicing Compliance KPIs

Loan servicing compliance depends on everyone at the community bank working together to follow processes. One of the best ways to ensure this is to establish a clear set of guidelines for everyone to follow and, most importantly, track them. For example, you can track:


  • The decision to close time cycle to ensure your borrowers get their funds as quickly as possible so you don’t run into compliance problems related to loan funding;
  • The application approval rate, which can give you valuable insight into how diverse your loan portfolio is and whether you are falling short of any application-related compliance standards;
  • The total loan revenue your community bank earns, on average, per loan, which you can then compare to industry standards. If it is significantly lower or higher than most banks in the industry, it could be a sign that your bank needs to revisit its compliance or loan origination system.

Even KPIs that aren’t directly related to loan servicing compliance can help you identify vulnerabilities in your system and fix them before they become greater problems down the road.

Create a Loan Servicing Checklist

Loan servicing checklists are a simple way to assess your system every few months or so to check that you’re still up to date with the latest regulations. It’s important to note that these checklists shouldn’t necessarily include a full list of current laws. Instead, they should prompt you to look closely at your system and compare it to the latest compliance changes or trends. It keeps the compliance process fresh in your mind.

Automate Your Loan Management

Automation and loan servicing compliance go hand in hand. When community banks rely on staff to service loans manually, it can open your institution to human error. This in turn can cause compliance issues. When you automate banking systems like payment processing, collection processes, and certain borrower communications, you reduce the risk of human error. You muar ensure your automated system falls under compliance and update the software as regulations change.

Hire a Reliable Call Center or Collections Agency

One mistake that some community bankers make is trying to manage their own in-house call centers or collections departments for loan servicing. Outsourcing these services is often a better option because dedicated third-party call centers or collections agents can focus on the compliance issues that apply directly to them. Rather than one community bank trying to juggle every compliance standard from loan originations to borrower communications and collections, they can instead rely on experts to handle the regulatory rules they’re most familiar with. You’ll gain the benefits of having a call center and debt collector without directly managing the regulatory details associated with them.

Partner with an End-to-End Loan Servicing Provider

The most important step that community bankers can take to more effectively manage loan servicing compliance is to hire an end-to-end loan servicing provider. The company takes care of:


The main benefit of hiring one of these companies to perform all these services is that you no longer have to manage certain compliance-related issues on your own. The company considers the details and ensures the systems they use are fully compliant. They also train their staff effectively so that they understand exactly what the rules are and how they should follow them.

How to Create an Always Up-To-Date Loan Servicing Compliance System

One aspect of loan servicing compliance that’s especially difficult to manage is that standards are constantly evolving. Even if you are compliant today, that doesn’t necessarily mean you’ll remain compliant. Therefore, it’s important to use a loan servicing system that is flexible and lets you make the changes you need.

These five services and tools help community banks more effectively manage compliance even as the industry changes. If you work with a reliable, trustworthy loan servicing provider, it’s even easier to maintain a flexible system. Not only will the company stay up-to-date with new regulations, but they will also immediately update any software or hardware required to stay compliant. If their staff needs to understand new regulations—particularly when it comes to communicating directly with customers—they will be properly trained by compliance experts who can closely coach them through the process. Working with a loan servicing compliance partner is an excellent option for community bankers who want to stay on top of all of the latest compliance trends and risk management best practices.


Getting Started

defi SOLUTIONS offers the systems and servicing that help community bankers with their loan servicing compliance needs. We help you improve your loan servicing systems while staying up to date with your industry’s latest regulations. To get started, contact our team today or register for a demo.


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