New Compliance Burdens Affect Vendor Relationships
Participants in all parts of the loan origination cycle are feeling the burden of the new, stricter compliance rules and regulations.
But as Tom Hurst, president of appraisal management company StreetLinks, said, “To be compliant, you just have to decide you are going to do the business right.” On the walls of the Indianapolis-based company’s office it says: “Do things right and do right things.”
He said doing things right has cost it some business over the years, but it does not have any regrets about that.
Many of the rules have been on the books for years in one form or another, he noted, but they were not strongly enforced.
Treat the process with the respect it deserves and don’t cut corners for the sake of profitability, one should be fine on the compliance front.
StreetLinks is launching AppraiserPlus in August, a program which changes the nature of the relationship between appraisers and AMCs. Hurst is quoted in a press release saying they want to provide measurable benefits to both appraisers and lenders through real partnerships and not vendor micromanagement.
This comes at a time when CFPB has put lenders on notice that they will be held accountable for their vendors’ (including AMCs and appraisers) activities.
It includes what the company called bringing back the days of cash on delivery payments to the appraiser.
Hurst noted that Dodd-Frank just requires that AMCs pay appraisers in a timely and consistent manner, and that some state laws and/or regulations put that at 30 days.
StreetLinks believes it should go above and beyond what is called for. Hurst pointed out his background running a local appraisal company and noted that with all of the compliance burdens it is a harder and longer process to do an appraisal today.
In the past, most of the fees were collected at the door from the borrower and the Home Valuation Code of Conduct changed that.
The company has been working on developing this program over a year. And from a compliance side this does relate to the CFPB vendor responsibility statement.
Separately, there have been instances where an appraiser has collected the fees from lender for an appraisal, the work was completed but the appraiser never received the funds as the AMC which engaged them went out of business.
For the lenders, this can become a major issue. Chase has been involved in a dispute with appraisers hired through Evaluations Solutions. MetLife was on the hook and actually paid twice because the fees paid to AppraisalLoft were never passed on.
With this program, the appraiser can do his or her job without having any thoughts in the back of their minds regarding payment, Hurst said.
“I think appraiser payments are a problem. It’s not a StreetLinks problem and never has been a StreetLinks problem. But as an industry leader and an innovator and a trailblazer, we believe we can help do something about it, so was born AppraiserPlus.”
AppraiserPlus also limits or removes calls, text messages and emails to participating appraisers during the fulfillment process, allowing the appraiser to concentrate on creating the report (which is also now looked at very closely for compliance and underwriting purposes).
The program itself was born out a decision to treat those appraisers who meet StreetLinks guidelines, quality and turn time requirements differently. “We aren’t we sending them an order and allowing them to do their job, trusting in them to do their job,” Hurst said. They are treating the relationship like a partnership and as such it is a two-way street.
StreetLinks has always had compliance at the forefront. As rules came out about appraiser competency and local market knowledge, it had always had “pretty stringent proximity guidelines,” Hurst said, because it was the right way to do things.
Patrick Stone, president and CEO of Williston Financial Group, which owns a title underwriter and agencies, said compliance “is a mindset.” He continued that he had an epiphany recently when making a presentation before a group of title agents.
He followed a speaker whose presentation concentrated on the new rules coming from CFPB.
Stone saw the “troubled looks” on the faces of the audience members as they came to grips with having to deal with the changes.
“One of the thoughts I had was that you either embrace this and use it for the betterment of your company and your financial success, or you fight it, spend a lot of money and end up doing it anyway in a half-way manner,” he declared.
So in making his presentation, Stone told the audience to view this as an opportunity to reposition the title business as a financial services industry as opposed to being just a services industry.
Title companies have not been investing in the things that CFPB is requiring such as data security, written policies and procedures and “most importantly, training,” he said. People need to embrace these changes as one that will make their company a better one.
And taking on the mindset that one runs a financial services company, it is to the betterment of the consumer as well as to betterment of the company’s value proposition.
WFG’s employees are embracing Stone’s view. A meeting scheduled to take place shortly after this interview had a breakout on how it can make compliance a part of its corporate culture.
“Candidly, the mortgage industry and everything around it got a black eye in the downturn,” he declared, noting the negative press about how consumers were taken advantage of. But the new rules will work to the industry’s advantage if it embraces these changes.
Stone cautioned he wasn’t saying the industry did anything to deliberately hurt the consumer. But the industry also did not concentrate on being totally compliant.
As a result mortgage and related businesses “made it easy to be criticized” about things which weren’t done correctly. The new emphasis on compliance gives the business “an opportunity to overcome” this perception and it should embrace it, he continued.
There has never been an emphasis on “regular, consistent training. We need to train on a regular basis,” Stone said, and that will better all aspects of the industry and most importantly help the client.
WFG is being proactive, to the point where it appointed a chief compliance officer, Donald O’Neill, who is also an attorney. His duties include implementation of improved employee and title agent training, plus work on licensing, audit and programs designed to update and track adherence to the company’s policies and procedures.
Stone added that part of O’Neill’s duties is to make sure the company is offering the same services to its agents.
A benefit of embracing compliance makes WFG makes the company more appealing to lenders as a vendor they would want to do business with, he said.
And the financial services provider mentality has also helped to improve internal morale, he added.