Loan data quality

Faulty Memories Are Affecting Loan Compliance

Have you ever been convinced that something happened, but later found out from a relative or friend that it never did? Memory can be a curious thing, crystal clear in our minds and eliciting powerful emotions, yet sometimes completely inaccurate.

In her TED Talk, “How Reliable Is Your Memory?” cognitive psychologist Elizabeth Loftus cited a startling statistic. “Information has been gathered on 300 defendants who were convicted of crimes they didn’t do,” she said, “… and when those cases have been analyzed, three quarters of them are due to faulty eyewitness memory.”

Speaking as a former mortgage professional with processing, underwriting, originating, servicing, and capital markets experience, Loftus’s findings explain a lot.

The Mortgage Banking and Real Estate Industries Deal With a Lot of Data.

Realtors have to shuttle the homebuyer’s information to the loan officer or loan processor, or whoever else is in charge of the loan file. They have to relay various data and documents to the underwriter.

The title agent has to research the house’s title and be sure it is in the clear.

The lender has to field all the figures on the Loan Estimate and collaborate with various parties in the process, then reconcile the actual fees with settlement agents to produce the Closing Disclosure. The loan package has to be reassembled in post closing and shipped to an investor.

People Aren’t Perfect, and Neither Are Our Memories

This is just a snapshot of a hugely complicated process— most of which is done manually. How this vast amount of data “moves” from one participant to the next is crucial, because humans make mistakes and our memories are faulty.

When I was a loan officer, I remember speaking to an underwriter about a borrower’s bank deposits or income stability, and being 100% certain that I had spoken with the borrower about the anomalies and knew the explanation for them. Then I received a letter of explanation from the borrower that was different than I had recalled. 

Generally, we ask ourselves, “What do I remember?” not, “How well do I remember?” We don’t grade our own memories unless we are studying for a test, a performance or a presentation. And even then, our memories begin to decay once we stop reviewing the data on a regular basis.

This video from the popular National Geographic series “Brain Games” provides a great visual example of memories in action—with a 67% failure rate:

In the mortgage industry, if 67% of mortgage professionals failed to notice a TRID error, it probably won’t be noticed at closing or even after. Many may fall into the “zero tolerance” category, which is highly concerning—especially for lenders, who take the brunt of TRID loan liability.

TRID Is Complicated – It’s Just a Matter of Time Before Someone Missteps

Of course, it’s not necessarily true that 67% of mortgage professionals will fail to notice errors in a loan file. But the fact remains that none of us are a 21st-century Sherlock Holmes—though sometimes it can feel like the industry expects this of us. At almost 2,000 pages, TRID is a complicated rule. Manual processes and human means can only go so far before someone missteps.

Elizabeth Loftus may have said it best:

“Out there in the real word, misinformation is everywhere. We get misinformation not only if we’re questioned in a leading way, but if we talk to other witnesses who might consciously or inadvertently feed us some erroneous information, or if we see media coverage about some event we might have experienced, all of these provide the opportunity for this kind of contamination of our memory . . . we can’t reliably distinguish true memories from false memories.”

A chilling statement. These impostors in our heads, these altered facts or even implanted lies, are indistinguishable from the truth. Like an egg from a cuckoo bird that lays its eggs in another bird’s nest, they sit in our minds unnoticed. We aren’t looking for them, so we don’t see them.

But hope is not lost.

ATS Secured’s Technology Creates True Transparency and Collaboration

This is possible because everyone working on the loan file can review it in one place, instead of analyzing different versions of it on separate systems.

If one person misses an error on the ATS Secured loan file, it is much more likely that it will be caught by others working on the file. False data, or false memory, will be brought to everyone’s attention by the light of our transparent, secure environment.

You may believe your TRID loan is compliant. But have all participating parties on the file reviewed and verified the same data, documents, and disbursements? Have all their actions and communications been tracked to be sure that no one forgot or miscommunicated something—or forbid the thought, tried to get away with fraud?

The human memory is all too malleable, making it vital for all mortgage professionals to have the kind of technology ATS Secured provides. We put a spotlight on false data, and help to verify that end result is accurate and compliant.

Don’t be fooled by false data any longer. Learn more about ATS Secured here, and contact us to get started.