Compliance in 2022

"Compliance” may yet again become the buzzword of 2022

Insider

Contributing Writer

I rarely have clients call in distress seeking urgent help. As I practice mortgage compliance and not criminal law, most calls I receive take some time to research. However, a few years ago, I received a call from a frantic mortgage broker asking me to come to her office as soon as possible. Perhaps it was the distraught tone in her voice or my genuine intrigue as to what compliance conundrum could be so pressing, I grabbed my purse and started my drive.

Forty-five minutes later, I was in her office as she relayed to me the traumatic event that had unfolded that morning. Two men had arrived at her office and asked her to confirm her name and the name of her company. Initially thinking they were potential clients, she confirmed the information only to find out that they were investigators with the state regulatory office. Unfortunately, by the time she called me, and I arrived at her office to help, the time for implementing solutions had mostly passed.

For the last two years, many mortgage companies have allowed employees to work from home, which has led to a greater sense of complacency surrounding compliance within their office.

While mortgage compliance has no absolutes, “compliance” may yet again become the buzzword of 2022. As mortgage companies try to navigate the new normal and how to bridge the changes that have come with the last two years, their Compliance Management System may be a far-off thought, perhaps even a distant memory.

As non-depository mortgage companies close most mortgage loans in the country, it is safe to say that they are becoming the focus of the regulatory authorities’ enforcement efforts. The aggressive and coordinated multi-agency examinations and enforcement actions will likely affect these small businesses as they brace for impact and fallout from this newly increased scrutiny.

The most recent coordination and enforcement efforts that are being strategically planned for precision implementation include:

• The newly appointed chief for supervision and enforcement at the CFPB

• The potential for up to 30 new enforcement attorneys being hired by the CFPB

• FHFA and FHA implementing the Memorandum of Understanding for Coordinating Investigations and Compliance Reviews

• The announcement of a new initiative by the DOJ, CFPB, and OCC to combat redlining

According to the October 22nd DOJ press release, the new initiative will “expand the department’s analyses of potential redlining to both depository and non-depository institutions.”

Although revived calls for more oversight and swifter enforcement may not be the news you were hoping for, there is hope on the horizon. It is anticipated that millions of new home buyers will become eligible for more flexible financing options as a result of the current administration’s affordable housing programs.

The new loan programs will inherently have new rules and their own set of compliance requirements. As a mortgage professional, the same level of learning and complying with the new guidelines, that goes into the new loan programs will need to be instituted in the overall management of the company.

Even as mortgage companies plan and prepare to ensure they have updated policies and procedures in place, they still remain a target. Compliance takes on the role of protecting the consumers as well as your mortgage company, now is the time to review your company’s policies to ensure they align with the new level of the regulatory authorities’ interpretation of the rules. Waiting until an auditor shows up at your door may come with unintended consequences including potential fines and anxiety attacks.

Areas frequently targeted by enforcement agencies are Fair Housing and Fair Lending. Both are critical to the security of our families and providing opportunities for wealth creation for all members of society. While there are times to take risks, carefully consider the implications and hazards associated with compliance that could be prevented. Start now with a strong review of your company’s current compliance efforts. Perhaps engage a third-party to review your policies. Changes and updates to your policies and procedures may end up protecting you and your company down the road.

Plan now for success in an audit, knowing you have taken the time to implement the best policies and practices when it comes to compliance for your company. In doing so, the next time two men show up at your office asking you to confirm your name and your business name, you won’t need to call me in a panic.