Today’s mortgage bankers have to accept very, very long audits as a marketplace reality. Whether they find auditors likeable and useful, on the other hand, is highly disputable.
It would be fair to state that nobody likes overzealous auditors even when both the auditors and the audited have the same agenda—to avoid and correct foreclosure process mistakes. And according to James MacLeod, president and COO of CoastalStates Bank of Hilton Head Island, S.C., all it takes to change that is positive thinking and constructive self-evaluation.
MacLeod has a different take on the role of bank examiners and the highly intense audits conducted these days by the regulators on lender-servicers. “They bring value to the market,” he said during a panel discussion on mitigating repurchase risk and underwriting quality at the Mortgage Bankers Association’s National Secondary Market Conference in New York.
At times mortgage bankers are up for surprise questions from auditors assigned by the Consumer Financial Protection Bureau or other agencies to review their loan underwriting processes. Often the mortgage banking knowledge of the examiners is neither deep nor up to date enough.
“There is a level of ignorance,” he said. And that’s exactly why and how they can bring value to the marketplace, “by asking questions that a typical mortgage professional would not.”
It could be that MacLeod is a positive thinker who looks at the bright side of every situation, however tough. But he has a point.
“We are stuck with it anyways,” he says, so it would be in everyone’s best interest to deal with it in a positive fashion. “In a way that level of ignorance helps banks look at their processes differently,” he argued. “I like it!”
In the light of what some would call a long auditing season, other panel speakers expressed concern about strategies pursued by the banks to improve their underwriting and loss mitigation processes.
For example, due to loopholes, in some cases the regulator has required the re-underwriting of loans that have already gone through a workout process, even foreclosure. Such drawbacks imply that mortgage banks will continue their search for model loan analytics well into the future.
There appeared to be a consensus, however, about a need to determine what the industry must do to ensure all mortgage bankers will benefit from proven best practices and lessons learned from the crisis so far.
For the near future, MacLeod agrees, the disruptive nature of prolonged audits represents an unavoidable nuisance that as a rule is not met with his positivistic approach.