New CFPB Regulations: Opportunity, Not Problem

JUL 17, 2012 9:50am ET

Regulations can sometimes be freeing. And in the case of the new and soon-to-be-implemented Consumer Financial Protection Bureau requirements related to servicing and loss mitigation, we see a great opportunity to know more and thus, have more power in every transaction.

Rather than struggle to comply, why not set the standard by which other servicers will ultimately be measured?

The government is actually more than a decade behind in recognizing what has become known as the experience economy. Introduced as a concept in 1998 by B. Joseph Pine II and James H. Gilmore, the idea of businesses “orchestrating memorable events for customers, the memory itself the product,” has been long in coming.

The trend toward experiences is especially important in an economy driven by technology and automation—which banking has notoriously been. Enough of the bottom-line, money-driven approach to business; people are shopping for happiness.

So now that the government is catching on and listening to the masses, what are you going to do?

With the bucket-load of regulations coming down the pike toward mandatory implementation in our industry, it’s time to track, measure and quantify experience while simultaneously speeding the process, complying with changing rules, and recovering the most dollars.

Has the homeowner been sufficiently cared for, attended to and explained all relevant and tiny details so that the ensuing action is appropriate and not a blindside? When the decision to foreclose is made, are you 100% certain that loss mitigation efforts were exhausted? In a short sale, can we provide enough transparency to potential buyers so that they don’t feel mistreated by the process?

Checking boxes off a procedural checklist is not going to satisfy the new compliance requirements, that’s for sure.

It’s going to take a flexible, robust, cloud-based system that literally changes how the game is played without changing current software or business procedures.

As an example, VerifiedShortSale has the flexibility to collect and track any and all information that you want (or need) to know as it applies to a short sale transaction. Every consumer touch point. Not just your borrower (although that’s a great place to start), but also potential buyers of a short sale who ultimately are also consumers of financial services. And since CFPB regulators will be looking at the experience of the consumer serviced in the short sale and foreclosure processes, well, we’d better start determining what information will reveal how that experience went.

The governmental intentions are good and sincere. We should care whether our customers saw it coming. We should prove to our customers that we really are trying to help them through a difficult process. We should prove to regulators that we’ve done everything we could to prevent a foreclosure. We should prove to potential banking customers that we’re a fair and forward-thinking enterprise. We should prove to investors that we’ve recovered every possible dollar. And we should prove to taxpayers and other homeowners in the neighborhoods we serve that we’re doing what is right in order to help restore their lost equity.

It’s not just about protecting the consumer. It’s about rebuilding confidence in the housing industry based on best practices and transparency.

You must be tracking every single action and notifying every stakeholder with real-time updates. You must know at a glance whether a short sale is moving forward or being stalled by your borrower, their agent, or their hired negotiator. You must know early in the process whether a closing is going to happen or be blown up at the table so that you aren’t wasting the precious resources you have on transactions that will never go anywhere.

The CFPB isn’t telling anyone what the right method is; every institution needs to come up with its own process. How you treat your customers is up to you, but you must have the toolset you need to make sure you know about everybody and everything in your short sale pipeline: Who did what when and how, and make sure your team is steering the course toward greatest success.

You’ll need insight into short sales that you’re lacking today, like real-time local market feedback that resolves valuation discrepancies. Whatever technology already exists in your organization today, it’s not telling you what you really need to know.

The more you know, the fewer holes there are for mistakes. No misinformation. No room for error or obfuscation. You must know everything there is to know. You must plan your approach strategically, confidently. You must reduce risk wherever there is opportunity.

Most importantly, you must comply with the newest regulations while considering the consumer experience. Not because you have to, but because it’s the right thing to do.

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