Although lenders received some good news via Freddie Mac's February U.S. Economy and Housing Market Outlook, raising the enterprise's 2015 originations forecast from $1.2 trillion to $1.3 trillion, the Aug. 1 TILA-RESPA Integrated Disclosure rule implementation deadline still looms large.
While the purpose of these disclosures is to help consumers better understand the mortgage loan costs and risks, the residual consequences mean serious added costs for lenders. However, given increasing repurchase rates, as well as enforcement fines and penalties from the Consumer Financial Protection Bureau, these implementations are just the kick start lenders need to protect themselves against avoidable and debilitating financial costs.
Economic growth is certainly welcomed, but it does present even greater pressure for lenders to comply with the new standards.
As many mortgage industry participants are well aware, through the TRID rule the CFPB has mandated that lenders implement the Loan Estimate Form and the Closing Disclosure, as well as new consumer disclosure timeframes, to take effect on Aug. 1, 2015.
Perhaps the solutions addressing TRID compliance concerns (automated technologies, business rule-driven processing systems and interconnected structures) among lenders, brokers and settlement agents, will reduce risk of manufacturing defects.
Regardless of the added benefits brought on by improved technology, we can all agree that industry players must prepare for Aug. 1 by modifying their current systems and processes. Further, lenders must evaluate their existing technology and compliance budgets and allot funding for development, testing, integration and training.
What elements should be added to the budget? Rather than get into specifics about technology that address TRID specifically, consider the long-term perspective.
In the years following Dodd-Frank, we've seen that the environment of frequent regulatory change is not going away. In order for entities to keep up with changing regulations and remain compliant, their technology should be nimble, adaptable and capable of business-oriented configurability in real time. "On-the-fly" changes will become the norm, and lenders need processing systems that can quickly add or remove validations, workflows and conditions.
There must also be seamless integration throughout lenders’ entire value chain, whether those are internal systems and processes and/or vendor partner systems and processes. An ideal scenario has BPM at the core with seamless integration with various supporting systems, including document management, compliance check and rules.
Whether it's the GSEs or the CFPB, it is clear that the heightened oversight and enforcement is here to stay — and for good reason. With such risk at stake, now is the time for industry participants to consider long-term technology that will address our ever-changing regulatory climate.
Omar Quddus is president and managing partner of Digital Risk.