It is clear that throughout 2013, compliance will be at the forefront of technology, origination and service initiatives with a significant focus on non-banks, community banks and credit unions scrambling to adhere to the Consumer Financial Protection Bureau requirements and the Dodd-Frank Act, among others, due to a severe lack of resources and subject matter expertise.
The housing crisis brought the need for many levels of transformation from a capital, mortgage process, product and technology standpoint. As the cost to originate and serve loans has significantly increased, the relevance of technology has grown exponentially. Given the emergence of cloud technology and web-based applications, the ability to improve efficiency and precision can be key drivers to reduce costs.
But to understand the road ahead, it’s important to take a look at where the industry has been. In 2008, the Federal Reserve Board used its delegation of authority to regulate unfair, deceptive and abusive practices to address servicing, however, it did not address servicing issues.
Two years later, Dodd-Frank amended the Truth in Lending Act and the Real Estate Settlement Procedures Act to codify the 2008 regulatory changes as well as add other servicing requirements, such as shorten existing time frames for responding to qualified written requests and prohibit fees for responding to QWRs, among others.
Like the regulations in 2008, the Dodd-Frank amendment still did not address systemic servicing issues. It did, however, further prohibit servicers from failing to comply with any other obligation found by the CFPB “to be appropriate to carry out the consumer protection provisions of the act.”
Fast forward a few more years to today and the servicing world has greatly changed. With the amount of rapid and complex developments in the mortgage industry, lenders, investors and servicers face several quality and compliance related problems. To add to that complexity, many analysts expect tighter regulations from state and federal agencies in the future. It is a growing concern that must be addressed.