Over the next several weeks, our financial services team will be sharing observations on the current state of the mortgage industry, as well as trends we see gaining traction in future months and years. We’re calling this series Mortgage Matters, and it will feature insight on technology road-mapping, reducing loan origination costs, improving customer satisfaction, navigating the fluctuating regulatory environment, and retaining top talent.
State of the Mortgage Industry: The Regulatory Change Environment
The 2008 financial crisis created a new normal in the regulatory environment of mortgage lending.
The passage of the Dodd-Frank Act, creation of the Consumer Financial Protection Bureau, and the ever-changing regulatory landscape made it necessary for lenders to double-down on investments, general counsel support, expanded compliance departments, and comprehensive risk assessments. Large fines, such as the $1 billion penalty recently assessed against Wells Fargo, served as a warning for the unwary. This was just the tip of the regulatory iceberg.
Then, just as the industry was beginning to acclimate to these new paradigms, the U.S. presidency changed hands. As Republicans took power, they weakened the authority of the CFPB and threated to un-do parts of Dodd-Frank. Needless to say, the regulatory environment remains changeable.
This environment, such as it is, has left many lenders scrambling to find effective and cost-efficient solutions. Lenders must choose among disparate options including building a custom workflow system, purchasing, and configuring off-the-shelf software or relying on manual inputs and reviews.
While the seemingly lower initial cost of manual processes may be alluring to some, be forewarned: manual processes are very cost-intensive and risky over the long run. Manual, linear processes tend to be more prone to human error. And errors on the regulatory front can lead to law violations – and that could ultimately result in unpleasant (and expensive) interactions with federal and state regulators.
The Path Forward
As the regulatory environment continues to change, an eye to the future should also guide your path forward. For instance, as consumer data continues to become a hot topic, proper data management becomes crucial and an integral part of the overall enterprise governance model. Thus, an optimal path forward doesn’t solely revolve around a GRC tool.
How do you determine which solution works best in light of your business initiatives? That’s a question to ask the financial services team at Saxony Partners. The Saxony team is unique in that we combine deep industry experience (our people come from the industries we serve) with technological expertise. We know your business goals, and we know what technology you should implement to achieve those goals. Check out more on our Financial Services page or reach out to Angel Armendariz or Alex Fan today to schedule a chat.
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