Why are the mortgage industry regulatory and compliance changes slowing down?
Those of us who have been working in the industry for more than a decade have been witnesses to what can only be described as a regulatory frenzy. Starting with the Dodd-Frank Act that gave birth to the Consumer Financial Protection Bureau, our industry has seen a near constant flow of new rules and regulations. But that may finally be slowing.
That’s not to suggest that regulatory compliance for mortgage lenders is getting any easier, it’s still a complex and demanding job; the rules just may not be changing as rapidly as we’ve seen in the past. For lenders who are using sophisticated regtech or a next generation LOS with compliance support built in, this is good news.
Dodd-Frank was a sea change act that changed just about everything about how our industry is regulated. The changes we saw as the CFPB was building its bureau out were game changing and it took a lot of time and effort to retool our process to meet the new requirements. But that is largely behind us now.
Yes, the CFPB moved the implementation date for its final QM rule to this year, and this year saw changes to HMDA’s Regulation C go into effect, but these were not major changes that caused any alarm in the industry.
What we’re seeing now is the fine tuning of rules and regs that is a natural part of regulating an industry serving a very large and diverse market. We expect that to continue and have built tools into our technology to make it easy for lenders to stay abreast of these changes and remain compliant.
Given the natural changes that occur in our industry during this part of the cycle, we don’t expect to see many major compliance changes coming in the near future. That could change if we see defaults and foreclosures rise, but given the high equity levels homeowners currently have, that’s also not very likely.
The other wild card comes in the form of product innovation. New subprime loan products developed back in the early years of this century were not managed properly and contributed to the financial crisis. Will innovative lenders in search of loan volume make similar mistakes now with non-QM loans?
Our MCP next-generation LOS originates these products, as well as more traditional forward and reverse mortgage loans. We’re not seeing any red flags at this point and with the fraud and compliance tools built into our software, we would see them.
That’s good news for lenders, who just want to help people buy their dream homes and have no desire to become compliance attorneys.
By Joe Camerieri, EVP, Sales & Strategy at Mortgage Cadence
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