PERSON OF THE WEEK: Compliance has never been a simple task, and the new wave of rules and guidelines from the Consumer Financial Protection Bureau (CFPB) has created new challenges for mortgage bankers. To understand the CFPB's immediate impact on the industry, MortgageOrb spoke with Chuck Wells, director of compliance and internal audit at The StoneHill Group, based in Atlanta.
Q: The CFPB has been busy this year with a series of new rules and regulations. On the whole, what impact will these have on investor requirements?
Wells: The plethora of new rules and regulations enacted through legislation and managed by the CFPB are having – and will continue to have – a massive effect on investor requirements. Just looking at all the areas that are affected by the new rules, investors will be rigorous in verifying compliance to all regulations, and failure by a lender to do so will create buyback risk.Â Â Â
The key for lenders is to ensure that loans sold to the investor are compliant and reduce repurchase risk. To do so, comprehensive due diligence is required at all stages of the loan process, including both pre-funding and post-funding stages. Due diligence must be conducted by qualified personnel that understand the current regulatory environment and the investor's guidelines in detail.Â
For lenders that use service providers to assist with due diligence and quality control, it is important to understand the new vendor due diligence requirements to ensure that their vendor partners are following secure and safe policies and procedures when dealing with customer data.
Q: Were there any surprises in the CFPB's new slew of rules? Specifically, was anything left out that was widely believed to be included in the mix?
Wells: The Dodd-Frank Act and the other laws enacted by Congress following the 2008 mortgage crisis were so massive and far reaching that it is hard to see any surprises. While the legislation was comprehensive in that it touched most areas of the mortgage lending process, in some instances, the details were either vague or missing, and that is where surprises or concerns lie. For example, the much-debated qualified mortgage rule is still not clear on the exact calculations for fees and points, and this can lead to unintended errors in the Good Faith Estimate and Truth in Lending disclosures.
Q: On the whole, how would you categorize the CFPB's relationship with the mortgage banking industry? Has the agency been receptive to the business needs of the industry?
Wells: The CFPB has appeared very open to ideas from the industry and has solicited feedback for upcoming rules from both bank and non-bank mortgage lenders. While the Mortgage Bankers Association has publicly praised the agency for its commitment to work with all industry players, the U.S. Chamber of Commerce recently wrote a letter citing concerns over inconsistency of the reviews and more training needed for the examiners.Â
As a new agency with such large oversight responsibility, some of the issues should be expected. We are hopeful that the CFPB will continue to be open to feedback and provide balanced review standards that protect consumers without placing unnecessary burden on lenders.Â
Q: The question of CFPB Director Richard Cordray's position has been the subject of political controversy. Do you see this having more than a distracting aspect to the CFPB's ability to function as a financial regulator?
Wells: While I do believe that the controversy over the recess nomination of Cordray has provided somewhat of a distraction, it is important to understand that regardless of the political posturing taking place, the fact is the bureau – in whatever structure it may ultimately take – is needed and is not going away.Â
Regulations being overseen by the CFPB are now laws to which we must comply, and the industry is evolving and adapting. Whether Cordray remains the head of the agency or if Congress changes the structure to be more of a panel of leadership does not change the fact that the CFPB is here, and the regulations being overseen are now laws.