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There is a memorable scene in the old holiday movie, “It’s A Wonderful Life,” when Jimmy Stewart as George Bailey, president of the Baily Savings and Loan, welcomes the Martini family to their new home which he just presumably funded for them. He makes a speech on the front steps offers gifts of salt and wine to welcome them. This is what consumers expect from our industry: Personal and caring service at an exciting yet stressful time in their lives. Somehow, I would add, our industry has forgotten to care about the consumer in the quest to sell loans at any cost.
The implementation of Dodd-Frank and the birth of the Consumer Financial Protection Bureau (CFPB) were, in part, a legislative effort to make sure we never forget that the consumer is the heart of our business. This is the heart of QM (qualified mortgage) and the ATR (ability-to-repay rule), and the vendor management rules our company helps lenders implement and manage.
Today, lenders need to make sure that they develop and implement policies and procedures to ensure that they are consumer-centric. From better quality origination and ability-to-repay safeguards, to vendor management and data privacy and security, lenders are on the hot seat more than ever over how they treat consumers.
Some of the key areas which face scrutiny include:
►Third-party vendor management, specifically closing agents;
►Affiliated business relationships: The affinity relationship between lenders and title agents, lenders and appraisers and lenders and real estate agents is constantly being examined;
►Minority inclusiveness: Consumers get the best deal when there is fair competition, free choice, and more choices for services and as HMDA seeks to gather data and explore how lenders make loans to all consumers, there is a movement to ensure that lenders are doing business with vendors owned by men and women of all races and ethnicities; and
►Title insurance costs and fees. There have been claims by consumer groups that there is not enough competition and that costs are much higher than the risks being insured, especially in the digital and computer age where property ownership, tax and lien information is readily available and losses from title claims nationwide are relatively small.
The key takeaway for lenders is that anyone not making an effort to design their business around the consumer, rather than viewing the consumer as a means to an end, may very well being paying a price for it sometime this year. As George Bailey reminded Old Man Potter, “Borrowers are human beings, not just cattle … they deserve better!”
This article originally appeared in the August 2016 print edition of National Mortgage Professional Magazine.