BLOG VIEW: The last several years have been painful for many of the third-party service providers in the mortgage loan industry. Bulletin 2013-29 from the Office of the Comptroller of the Currency, bulletin 2012-03 from the Consumer Financial Protection Bureau and the federal consent orders represent only a few of the significant regulatory impacts on these service providers and the mortgage industry.
With all of the oversight and scrutiny, however, progress has been made. Across all vendor types, there has been a 74% improvement in the number of high-risk items identified in operational audits conducted. This results in a 13% improvement in risk score of the vending group.
Audits conducted are presented in three categories: operations and management, security and privacy, and case management. In these three categories, our firm has seen a 49% improvement in operations and management and a 36% improvement in security and privacy. Case management, meanwhile, saw a 5.25% degredation in performance. Because case management performance carries the highest weight in the risk scoring, any degredation in that category has a higher impact on the overall risk score.
Most loan servicing vendor work is fairly low margin, so it could appear that improvements found in the areas of operations, management, security and privacy come at the expense of case performance, which may not be the best result for the industry and consumers.
At this time, our observation is that third-party service providers are in a much better position with regard to how policies and procedures are documented, financial controls, capacity management, and controls to protect consumer information and business continuity.
In this era of ever-increasing regulatory scrutiny, it is critical to ensure the industry has solid documented controls in place in order to meet the new regulatory requirements. We have to make sure that the quality and performance of the actual work product remains at a high level.
Terri Cravens is president and CEO of Springboard LLC, a woman-owned enterprise focused on mortgage servicing consultation, vendor oversight and operational compliance reviews of third-party service providers.