OFAC Compliance for Mortgage Lenders

OFAC in the Mortgage Industry

Mortgage lenders are financial institutions, and OFAC compliance is a core obligation. Whether you are a large bank with a mortgage division or an independent mortgage company, you must screen the parties to every loan transaction against OFAC's sanctions lists. Federal regulators, including the CFPB and banking agencies, evaluate OFAC compliance as part of their examination process.

Who to Screen

In a mortgage transaction, multiple parties are involved. You should screen all of them:

• Borrowers: Every borrower on the loan application must be screened.
• Co-signers and guarantors: Anyone who is taking on liability for the loan.
• Sellers: The party selling the property. This is sometimes overlooked, but you should not be sending funds to a sanctioned party.
• Settlement agents and title companies: Screen the companies involved in closing the transaction.
• Real estate agents: While lower risk, screening agents adds an additional layer of protection.
• Power of attorney holders: If someone is acting under a power of attorney, screen that individual.

When to Screen in the Mortgage Lifecycle

OFAC screening should happen at multiple points during the mortgage process:

1. Application: Screen all borrowers when the loan application is received. This is your first checkpoint.
2. Processing/underwriting: If significant time has passed since the initial screen, or if new parties have been added, screen again.
3. Pre-closing: Screen all parties shortly before closing. This catches any new designations that may have occurred since the initial screening.
4. Closing: A final check at closing ensures you are not disbursing funds to a sanctioned party.
5. Servicing: If you service the loan, periodic rescreening of your servicing portfolio is a good practice, especially when OFAC updates its lists.

Documenting Your Screening

Mortgage files are heavily documented, and your OFAC screening should be part of that documentation. For each screening you perform, record:

• The name(s) screened
• The date of the screening
• The lists screened against
• The results (clear or potential match)
• If a potential match was found, the resolution and reasoning

Many lenders include a standardized OFAC screening form in their loan file. This makes it easy for quality control reviewers and examiners to verify compliance.

Common Issues for Mortgage Lenders

• Timing gaps: Screening only at application and not again before closing leaves a window where new designations could be missed.
• Incomplete screening: Screening borrowers but not sellers, agents, or other parties.
• Manual processes: Relying on manual OFAC website searches is slow and hard to document consistently.
• Investor and agency requirements: If you sell loans to Fannie Mae, Freddie Mac, or other investors, they may have their own OFAC compliance expectations. Make sure your program satisfies those requirements.

How OFACScreen Helps

OFACScreen fits easily into the mortgage workflow. You can screen individual names during the application and underwriting process, run batch screens of your servicing portfolio, or integrate screening into your loan origination system via our API. Every screening is logged with a timestamp and results, giving you a clear audit trail for your loan files.

Our plans are priced for independent mortgage companies and mid-sized lenders, so you get reliable screening without the cost of an enterprise platform.