5 mins

The Brace Rules Engine: Codifying Human Process for Ultimate Compliance

If you’ve ever worked in mortgage servicing, you understand the vast amount of complex rules and regulations that mortgage servicing compliance teams must decipher. And what are the tools at the disposal of default teams such as Loss Mitigation or Default Resolution to make such critical decisions? If they’re lucky, it’s a spreadsheet.

The extreme complexity of the mortgage servicing industry coupled with legacy technology has created a massive barrier to entry for innovators who want to help Servicers, homeowners, and investors. So for decades, Servicers have been left to cobble together disparate systems while struggling to keep up with their massive workloads.

Despite the many hurdles, Brace has developed a first-of-its-kind Default Management Platform designed to give Servicers a much-needed advantage in operationalizing complex requirements. While the Default Management Platform acts as a single access point for Servicers and homeowners to work through the loss mitigation process, the Brace Rules Engine is doing all the heavy lifting on the decisioning side. With compliance at the forefront, the Brace Rules Engine delivers:

  • Real-time automated workout decisioning,
  • Regulatory responsiveness, and
  • Investor transparency through a secure, auditable system.

The Brace Rules Engine can help busy Servicers reduce their overall compliance costs while increasing revenue for their organizations. It provides control to compliance teams and drastically reduces (if not eliminates) costly oversights when creating loss mitigation workouts. Leaders can now focus on high-level decisions instead of worrying about rote processes.

Let’s take a look at exactly how the Brace Rules Engine works hard so your teams can work smarter.

Real-time Automated Workout Decisioning

The Brace Rules Engine is highly flexible and can quickly deliver a compliant decision to any loss mitigation application and draft modification terms for a homeowner in need. A homeowner fully engaged in the application process can see their workout solution options in a matter of hours instead of weeks.

The Brace system has codified each of the investor/insurer guidelines into individual facts, each of these facts can then be arranged to match an investor/insurer’s requirements. When run, the Rules Engine then reviews each fact for a match sequentially, against each guideline in order of the guideline’s hierarchy. Based on these conditions the Rules Engine decides the homeowner’s eligibility against the provided data.

Once all data is imputed and confirmed in the system, the Rules Engine provides the best possible loss-mitigation workout solution based on all guideline criteria. We could say it was as simple as a yes/no flow chart, but anyone familiar with the guidelines knows with the parameters they lay out, it needs to be much more complex than that.

The whole system is triggered into action when the homeowner submits their loss mitigation application. The Brace Rules Engine runs in real-time upon that 1st submission and then continues to re-evaluate each time an updated piece of information is added either by the Homeowner or Servicer.

Brace Rules Engine Waterfall Diagram.

Regulatory Responsiveness (First to Market)

One thing all leaders are aware of is that regulatory change is constant and accelerating. So what happens when regulations change or new ones emerge? Because each variable is now a fact, it’s simply a matter of determining how your organization wants to respond and updating or adding a new rule accordingly.

The Brace Compliance team will reach out with workout recommendations as soon as (or before) regulations change. After administrators approve their response to the changes, the Brace engineering team will adjust the fact accordingly. Regulatory changes can even be set to go live on a set date. These changes are implemented with zero downtime, keeping your Servicing teams ahead of the curve.

Investor Transparency Through a Secure, Auditable System

Most Servicers work with a customized spreadsheet designed by someone with a Ph.D. in Excel. While the macros are impressive, the actions made within them aren’t trackable, making accountability within servicing teams challenging. Also, the manual processes within these tools make third-party QC audits lengthy and costly.

LMU code snippet.

On top of that, Servicers that are confined to disparate spreadsheet processes are often forced to leverage specific third-party waterfall engines. These tools are costly and often require Servicers to submit batches of applications. This time-consuming process definitely doesn’t fall under the ” real-time ” category, offering no options for Servicers to progressively review the decisioning process of applications as new data is identified or added.

We often hear from investors that one of the most significant drawbacks of default mortgage servicing, in general, is that it’s so hard to know if their servicing partners are complying with their guidelines. With the Brace Rules Engine, each Servicer’s loss mitigation waterfall is set up to specifically comply with their investor’s needs, which are 100% auditable. It also ensures that all requirements are being followed in the exact same manner by every team member.

Once the Brace Rules Engine is programmed to meet a Servicer’s business need, it’s protected by an SSO authentication where only those with permissions can make adjustments. All changes to the waterfall algorithm are then noted in an audit log. Brace Rules Engine makes every loss-mitigation waterfall decision easily accessible—getting QC teams out of your hair quickly.

Now investors no longer have to worry if you’re following their requirements, and you can continue to be their Servicer of choice.

The True Cost of Compliance

From an operational perspective, the Brace Rules Engine helps reduce the costs associated with staying compliant with regulators and investors while delivering fast loss mitigation decisions that will keep your portfolios healthy. However, when it comes to compliance, not all costs are financial.

Every Servicer knows that it takes only one wrong decision that can lead to hefty penalties that damage your company’s reputation and, ultimately, revenue. When fines are levied, you lose investor confidence and have an uphill battle to regain trust. In the end, it’s the homeowner that feels the ultimate cost of incorrect waterfall decisioning. With so much at risk, doesn’t it make sense to explore new tools that can de-stress you, your teams, and your investors?

Check out our product feature in American Banker’s Advances in Tech webinar to see the Brace Rules Engine in action. Also, please reach out to our sales team to schedule a full live demo.