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Over the last eight years, the mortgage industry has dealt with unprecedented regulatory changes. Among the most significant changes in recent years have been Regulation Z/loan officer (LO) compensation, followed by qualified mortgages (QM), and on Aug. 1, 2015, TRID (the Truth-in-Lending Integrated Disclosures). Understanding these rules presents a challenge in itself, let alone dealing with the requirements (once defined) necessary for implementation within a company’s technology and workflow loan manufacturing systems and processes.
Each company, whether a retail origination lender or broker, wholesaler or correspondent, has separate needs necessary to move the rules from review to implementation.
So, how does a mortgage lender grow its business while adjusting to these regulatory changes? Do your homework:
1. Become educated: Learn everything you can about the rules. Attend multiple Webinars and seminars. There is an abundance of resource material available today from industry specialists, whether it is legal and compliance firms, title companies, wholesalers or of course, industry associations.
2. Leverage your inside operations staff: Take time to walk and talk through the impending rule changes with key individuals involved in the daily work flow. They have a perspective many managers and department heads do not have. Sometimes, the simplest questions go unsolved because those individuals close to the process were not asked in advance.
3. Communicate with your key vendors early: Any vendor that has integration into your system needs to be part of your discussions early in the process, including your LOS vendor. Volunteer to be a part of their beta test group. This will give you an advance peek into the work flow and systems changes you will ultimately have to adopt. It will also give you a chance to help influence some of that functionality.
4. Leverage the knowledge of your vendors: Ask your vendors to include you in any think tank discussions surrounding the rule changes. Most vendors would gladly include a business partner in implementation discussions to share thoughts and concerns about implementation challenges and objectives. Both sides benefit from dialog on issues they may not have thought of on their own.
5. Review your vendor contracts: With many rule changes, especially TRID, the vendor relationships can have significant changes, so make sure you are reviewing any vendor contract to ensure it provides you with the desired services, Service Level Agreements, rights and remedies.
6. Select your vendors carefully: With each regulatory change, the complication of loan origination continues to increase. These regulatory changes are seldom changes that are “in place of,” but rather, are in “addition to” the existing regulatory rules. With TRID you still have to comply with, to name just a few, LO Comp, QM, and appraiser independence. Integrating with any type of vendor is time consuming and costly.
Select your vendors based on someone you want to partner with for the long haul, has your best interest at heart and maintains a keen focus on “doing it right.” This will help to ensure that both you and your vendors are in compliance and out of harm’s way.
Keith Bilodeau is senior vice president of Wholesale Production at Freedom Mortgage. With more than 30 years of experience in capital markets, operations and production, Keith offers unique expertise in helping mortgage professionals grow their business by leveraging Freedom Mortgage’s technology and programs. He may be reached by e-mail at [email protected] or visit www.freedomwholesale.com.
This article originally appeared in the June 2015 print edition of National Mortgage Professional Magazine.