Mortgage compliance refers to the adherence to rules and regulations governing the mortgage industry. Mortgage lenders and servicers face various risks related to compliance, but before we dive into the classifications of these risks, it’s important to understand what regulatory compliance testing is, and why it’s so valuable for borrowers and lenders.

What is regulatory compliance testing?

Regulatory compliance testing in the mortgage industry involves assessing whether a mortgage lender or servicer is following all relevant regulations and guidelines set by federal and state authorities. This type of testing is important because it helps validate that mortgage companies are treating their customers fairly and are complying with all applicable laws.

Regulatory compliance testing can cover a wide range of topics, such as the accuracy of disclosures provided to borrowers, the handling of borrower funds, the proper calculation and collection of fees, and adherence to fair lending and anti-discrimination laws. It can also include reviews of internal controls, policies and procedures that are in place to assist compliance.

Mortgage companies are typically subject to a variety of regulations, including those set by the Consumer Financial Protection Bureau (CFPB), the Department of Housing and Urban Development (HUD), and various state regulatory bodies. Compliance testing can be conducted by internal auditors, external auditors, or regulatory examiners.

The goal of regulatory compliance testing is to identify any deficiencies or violations and to provide recommendations for remediation. This helps mortgage companies operate in a compliant and ethical manner, which can help to protect consumers and maintain the stability of the mortgage industry as a whole.


It’s essential for mortgage lenders and servicers to implement robust compliance management systems to identify, monitor, and mitigate compliance risks effectively. Failure to comply with regulations can lead to legal action, fines, and reputational damage.

Beyond just understanding risk, being able to control risk levels in your loan origination system (LOS) or mortgage compliance management software is a powerful way to balance regulatory compliance with the expected effect on the lender. Check out Empower, Black Knight’s LOS, as well as Black Knight’s Regulatory Assist tools to learn more.

Please note that the information provided is for general informational purposes only and does not constitute legal advice. No attorney-client relationship is formed through the use or dissemination of this information. Consult with a licensed attorney in your jurisdiction who can provide you with advice tailored to your individual circumstances.


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