One of the biggest mortgage industry stories this summer is the release of the Consumer Financial Protection Bureau’s proposal to make mortgage disclosure forms easier to understand. The proposal includes new loan estimate and closing disclosure forms that are intended to simplify the process for lenders by addressing the differences in overlapping federal disclosure forms. It also benefits consumers by using plain language and a format that will help them to better understand closing details.
Those of us on the technology side of mortgage finance know all too well what this means for our community: more technology and process changes on top of all the recent investor and regulatory requirements. Having spent 10 years of my career on the mortgage investor side, I am well aware of the difficulties that new business and technology guidelines create, particularly for the lending community. Many aspects of the lending business may be impacted, including point-of-sale systems, origination processes, lender operating systems, document preparation technologies, new loan underwriting and approval processes, risk and compliance reviews, and pre-closing and post-closing functions. The impact list gets very long very quickly.
Each participating enterprise will react and comply with this type of regulatory change in different ways. The execution of their plans is usually related to how agile and flexible their operational and technology infrastructures are. While some tend to react tactically, others will be more strategic. When faced with a change that impacts business operations so broadly, there are two ways to view the challenge: as a crisis or as an opportunity. Visionary lenders should be considering a strategic approach best memorialized by Rahm Emanuel’s now famous quote: “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before.”
In my new role on the title insurance and closing side of the mortgage industry, I now have the opportunity to talk to lenders about the challenges that they face from a different viewpoint. I also have the good fortune to be working with some visionary lenders who embrace change as a strategic opportunity.
The CFBP is seeking public feedback on the proposal through November 6, 2012. Once the dust settles after the feedback period, and the proposal becomes new regulation, this may very well be the time for strategically focused lenders to re-establish the baseline for the entire loan production lifecycle, with an eye towards incorporating the agility and flexibility that will meet these and other changes that may lie ahead.
For years, mortgage lenders have patched and added to their technologies on an ad hoc basis to accommodate the constant barrage of regulatory changes. There has been little chance to really re-architect the business tools they use every day in a manner that holistically accommodates their operations. At this time, my recommendation to the mortgage lending community is this: look at these changes strategically, and as an opportunity to consider working with vendors who can align with your business as long-term partners.
Planning early will no doubt result in lender organizations emerging as better, stronger and more efficient originators in the face of this opportunity, and future opportunities like it.