Mortgage lenders face increasing scrutiny from both regulators and consumers, and poor communication could be putting loan approvals at risk. The Consumer Financial Protection Bureau’s 2023 annual report showed that the agency received more than 1.3 million consumer complaints, highlighting a surge in consumer frustration, with complaints spanning everything from credit reporting errors to mortgage servicing missteps. Of these, 27,900 specifically related to mortgage lenders, centering on unclear communication, which led to delayed approvals, unexpected loan denials, late fees, negative credit reporting, and even foreclosure threats — issues that some lenders only corrected after regulatory intervention.
For mortgage professionals, clear, accurate, and timely communication isn’t just good service — it’s a compliance necessity. Miscommunication can delay approvals, create fair lending risks, and even invite enforcement actions. How can lenders safeguard themselves from these risks?
Four Ways To Strengthen Communication and Reduce Compliance Risk
A proactive approach to borrower communication can protect both lenders and applicants, ensuring compliance while improving customer trust. Here are four mortgage compliance tips:
Clear Disclosures: Borrowers often cite frustration with confusing or misleading terms. Ensure that all disclosures, loan estimates, and approval conditions are clear, legally sound, and easy to understand. In a 2020 enforcement action, the CFPB fined two mortgage companies more than $1 million for failing to include required disclosures in VA loan advertisements, such as repayment terms and interest rate details, misleading veterans about the true cost of their mortgages.
Fair Lending Compliance: Language matters. Unintentional (or overt) biases in communication can create compliance risks under the Equal Credit Opportunity Act (ECOA). In 2023, Citi was fined $25.9 million after internal emails revealed that employees discussed how to cover up discrimination against Armenian-American credit card applicants. Citi intentionally denied credit based on last names associated with Armenian descent and then gave false reasons for the denials. This case underscores the compliance risks of biased communication — both internal and external.
Accurate Documentation: Regulators may request records of borrower interactions to verify compliance. Keeping clear, well-documented records of communications in appropriate, approved channels can help protect your company from legal and regulatory challenges. Recent enforcement actions have made this risk clear — financial institutions have been fined more than $2.5 billion in recent years for failing to maintain proper records when employees used personal messaging apps for business communication. Mortgage lenders who don’t prioritize compliant record-keeping could face similar scrutiny.
Real-Time Monitoring Tools: Mistakes don’t wait for audits. AI-driven tools such as HarmCheck can analyze communication for risks before it reaches a borrower, helping lenders avoid compliance missteps before they happen.
Why Compliance-Driven Communication Matters
Strong communication isn’t just about avoiding complaints — it directly impacts loan approvals, borrower confidence, and regulatory standing. Every clear disclosure, properly documented interaction, and well-crafted response reinforces your company’s commitment to transparency and fair lending.
The CFPB’s report showed that many homeowners who paused their mortgage payments during pandemic-era forbearance programs struggled to restart payments due to unclear lender communication, lost paperwork, and misapplied funds. Some were even pushed into foreclosure while waiting for their lender to process a repayment plan. The surge in forbearance during COVID-19 underscored the need for clear, proactive borrower communication on issues like this, because it can prevent costly compliance issues and protect borrowers from unnecessary financial harm.
In today’s tightening mortgage market, lenders who prioritize compliance-driven communication will not only reduce their regulatory risks but also build lasting trust with borrowers. In other words, good compliance is good business.
Amanda Nurse is the editorial and operations coordinator at Alphy.
HarmCheck by Alphy is an AI communication compliance solution that detects and flags language that is harmful, unlawful, and unethical in digital communication. Alphy was founded to reduce the risk of litigation from harmful and discriminatory communication while helping employees communicate more effectively. For more information: www.harmcheck.ai