What mortgage industry technology vendors and lenders are saying about upcoming Dodd-Frank Act compliance deadlines.
Some are thinking about major compliance deadlines coming in January and wondering how bad will it be. Some fear a possible "train wreck" as the industry tries to meet the Consumer Financial Protection Bureau's (CFPB's) January 2014 and subsequent compliance deadlines. [paragraph] As August came to a close, CFPB released a second update of its exam procedures covering the mortgage rules that will be the subject of regulatory examinations. This update gave notice that deadlines are now looming large for compliance with CFPB requirements as to the ability-to-repay rule, Qualified Mortgage (QM) and other new regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act. [paragraph] Though CFPB has issued a series of guides, mortgage lenders remain unsure whether their own compliance efforts will prove sufficient. [paragraph] "The regs are becoming more stringent," says Julie Vazquez, director of automation for Paramount Residential Mortgage Group (PRMG), Corona, California. "We know some regs are coming up that we can't prepare for because the regs themselves are not ready." [paragraph] Mortgage technology vendors are stepping forward in various ways to assist lenders in developing an internal "culture of compliance." Yet some are raising questions about the cost of this myopic--yet necessary--focus on compliance.
Are compliance concerns impeding technology development that could improve mortgage transactions and lower borrower costs?
However, some argue CFPB is simply enforcing business practices and encouraging technology solutions that the nimblest players have been adopting over the past couple of decades.
End-to-end systems, bi-directional data feeds, eDisclosures, eSignatures and workflow automation have been around for a while. In this view, compliance pressures simply prod technology adoption by mortgage companies that have been slow in "getting it" when it comes to automation and Web-based technology.
Same old flaws, new consequences
Some mortgage professionals accuse CFPB of overkill with its new rules. Yet, a July 2013 report by compliance specialist Quality Mortgage Services, Brentwood, Tennessee, showed that the top three compliance flaws in the mortgage application were very familiar: incomplete borrower information in the Fannie Mae Form 1003 loan application; errors and missing signatures on the Truth-in-Lending disclosure (TIL) and Good Faith Estimate (GFE); plus missing and improperly prepared Federal Housing Administration (FHA) disclosures.
To deal with surges in equally common underwriting and processing compliance errors, mortgage companies traditionally have hired more staff. Looming CFPB deadlines intensify existing compliance problems.
Deadline or no deadline, Nancy Pratt, director of eStrategy for Stewart subsidiary PropertyInfo Corporation, Houston, claims some lenders "are in some form of denial that this is coming."
When lenders toss their compliance problems over the fence to their technology vendors, other software purchases get crowded out.
Richard Hill, associate vice president for industry technology for the Mortgage Bankers Association (MBA), says the regulatory compliance burden is indeed narrowing the focus of technology adoption.
"When companies assess their investment needs and opportunities, they look for the best return for dollars spent for the future of the business. There are always more opportunities than there are dollars available. Regulation doesn't allow that decision-making process. Instead you have to comply or your company goes out of...