Expert: Lenders should think twice about scaling back compliance efforts
Under President Donald Trump, the regulatory environment changed drastically. But now as we near the 2020 election, change could once again be on the horizon.
Marie O’Brien, a 2019 HousingWire Rising Star who serves as director of compliance for mortgage quality management and research and senior associate in the compliance department of Abrams Garfinkel Margolis Bergson, sat down to discuss the changing regulatory environment.
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“You have to love what you do and be surrounded by people that support you – both at work and at home,” O’Brien said. “I have the pleasure of working with some of the smartest and most talented professionals in the industry, which is very motivating.”
And this is what O’Brien has to say on the current and future state of the regulatory market:
HousingWire: With the new approach to regulation under Trump, what do you see as the greatest compliance risk for lenders today?
Marie O’Brien: One concern is that lenders may scale their compliance efforts and resources back under a false sense of security that the industry is not being regulated as much.
I think this creates significant compliance risk as state regulators have not shown any indication of deregulation in this area. On the contrary, many state regulators are more aggressive than ever in their examination and enforcement activities.
Some states have even created their own “mini CFPBs” and/or additional divisions solely dedicated to consumer protection. With many lenders licensed in a number of states, compliance risk increases as the number of state-specific regulations and regulators increase.
HW: Are lenders concerned about the possible change in leadership after this year’s election, and what it could mean for compliance?
MO: Certainly, and for good reason – change in and of itself brings with it a number of concerns. In this case, however, there are candidates with drastically different views than the current administration. Depending on who we have in office next year, we could see very big changes in regulation from a federal perspective.
As an example, there has been relatively little enforcement in relation to fair lending issues recently. With a change in leadership and access to expanded HMDA data, fair lending and predatory lending practices may become a major focal point for enforcement actions.
HW: How can lenders best prepare for the uncertainty surrounding the regulatory environment?
MO: Control what you can control. Lenders must continue working towards developing and maintaining a strong and effective compliance management system. This starts with the basics – written policies and procedures, ongoing training, monitoring and corrective action and complaint management.
Importantly, lenders must customize their CMS. This means taking the time to read your policies and procedures and making sure they accurately reflect how the business operates. It also means tailoring training material to reflect your procedures, applicable regulations and your employees’ roles and responsibilities with regard to compliance.
Further, although the majority of lenders maintain a quality control program for reviewing individual loan transactions, many do not maintain any type of overall monitoring or internal audit program. Internal audits are essential for identifying and mitigating risk throughout an organization, as they look at various areas of the company – i.e. credit, operations, compliance, information technology and security, finance, corporate governance, etc.
Identified vulnerabilities and inefficient or noncompliant practices must be addressed and/or corrected. Lenders should also be reviewing their data for potential issues and/or problematic trends. This includes, but is not necessarily limited to, reviewing HMDA data, complaints, pricing exceptions, withdrawal rates, disclosure discrepancies, etc. Again, identified issues and problematic trends should be remediated.
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