For the first time, an automated regulatory compliance vendor to the mortgage space, Mavent, has been awarded a U.S. patent for technology used for compliance with consumer credit regulation.
     The issuance of the patent - originally drafted nearly a decade ago - is particularly timely given growing concern in the financial and institutional sectors about rising foreclosures and related credit problems. The patent covers systems, software programs and methods of use for businesses that originate and close loans secured by real estate in order to audit such loans for compliance with state and federal laws and regulations.
     "Heightened regulatory scrutiny and intense consumer advocacy is driving up the cost of mortgage compliance. Yet, mortgage lenders' budgets are shrinking," said Louis Pizante, CEO of Mavent. "For the growing number of institutions seeking to implement an automated compliance strategy, this patent is an essential factor to consider."
     Licenses to utilize the patent are currently available to Mavent clients as a component of its integrated services. Mavent is also considering providing licenses to interested financial institutions and mortgage-related companies that may presently be infringing on the patent.
     "The patent was filed when Mavent was incorporated," explained Jason Connolly, senior vice president of sales and marketing. "This isn't just limited to our system, but it also covers the process used to automate compliance. We filed some additional patents to strengthen and broaden the original patent as well. The initial patent was approved. It's gone through examination and appeals.
     "We're excited about this. Back when we started the company, we were at the dawn of automated compliance. This establishes us as being at the forefront. If you look at the current marketplace there are a lot of new regulations coming down. Lenders are looking to comply and they're looking to outsource. This patent is a consideration that they need to take into account when evaluating systems."
     The patented technology underpins Mavent's automated compliance solutions, including the Mavent Expert System, the Mavent Compliance Console MC2, custom-client automated compliance engines, its lender and broker license verification and monitoring service, and other compliance risk management solutions Mavent provides to lending institutions.
     Mavent analyzes electronic loan data to determine whether a loan complies with more than 300 federal and state consumer protection laws related to mortgage lending. Mavent has performed more than 25 million compliance reviews and its clients include five of the 10 largest lenders and seven of the top 10 investors.
     Now that Mavent has a patent, other compliance vendors could be in violation. "Other vendors could potentially be infringing on the patent," noted Mr. Connolly. "We have to employ a bit of diplomacy here. We're looking at this as a way to create partnerships. We always sought to be the standard for automated compliance."
     Further patents are in progress to strengthen this initial patent as well. "We filed a continuation-in-part to clarify parts and strengthen claims to build a wall around the original patent," said Mr. Connolly. "We filed patents around our high-cost process. We also filed a patent for our rules system and how we maintain it. The core message is that this demonstrates our leadership in this area. It's more efficient to use an automated compliance technology vs. doing this in-house."
     Mavent's compliance rules are maintained by its in-house attorneys in coordination with, and subject to ultimate approval by, its network of nationally recognized law firms. Accordingly, a Mavent review replicates an audit performed by a team of legal experts.
     The adverse economic impact that noncompliant loans can have on a lender's business has resulted in strong demand for automated compliance solutions.
     "The space has changed quite a bit since we started out," said Mr. Connolly. "The initial problem was doing second mortgages with restricted licenses. From there, you had the explosion of high-cost limitations."
     He added that "going forward you'll see rules about regulating underwriting, which is new.
     "There's also more emphasis on licensing," Mr. Connolly said.

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