PERSON OF THE WEEK: Brian Benson is CEO of ClosingCorp, a provider of technology and data solutions to the mortgage banking industry. MortgageOrb recently interviewed Benson to learn more about what lenders should be looking for when selecting vendors to meet compliance mandates, as well as the biggest challenges lenders currently face in meeting regulatory deadlines.
Q: When seemingly every other message or ad is about compliance, how would you suggest lenders sort through the morass to select vendor partners?
Benson: My advice would be to look for vendors who focus less on themselves and their products, and more on you. These types of vendors begin by asking a lot of questions about you and your operation, your processes, and where you perceive the challenges lie. They are passionate about helping you actually solve your business problems versus just pushing products, and they do their best to introduce solutions within the framework of your existing workflow.
The more you can find solutions that can work within an existing workflow, the easier it will be for your team to embrace and adopt those new solutions. Also, you really do need vendors that are well versed in the current regulatory playing field. They should present detailed and informative answers to all your compliance questions. And finally, always ask for references and do your homework before you buy.
Q: What do you see as the biggest challenge lenders have not yet tackled – but they really need to?
Benson: Lenders need to solve for the way the new closing disclosure is going to change the closing process. They have to imagine that it is August 2015 and that they are responsible for the successful consummation of the closing process. How will things be different than they are today? The answer is, a lot different.
Regulators want to see that lenders have a system in place that ensures they have vetted their service providers in a meaningful way. Using the best information available to estimate rates, having established as well as having a way to deploy strict business rule sets ensuring consistent practices across the business, etc., must be present. Lenders can use title companies and other third parties to perform some, if not all, of the closing function. But the responsibility for doing it properly – and in a way that is best for the consumer – cannot be abdicated by the lender.
Also, by August, lenders must have established what their business lines believe are the right way to quote and disclose fees in accordance with the new forms. All of these changes will impact the way collaboration works between the lender, the title company, the service providers, the consumer, etc. And the Consumer Financial Protection Bureau (CFPB) has repeatedly made it clear that there will be no grace period for enforcement.Â That's a lot to solve in 14 months, and many haven't gotten started.
Q:Â The CFPB is clearly looking for methods to monitor vendors before lenders onboard them and to have routine measures in place for ongoing monitoring. How can technology help lenders in this process?
Benson: Many different ways. First, technology can help lenders frame the playing field and provide a national perspective to local markets in which they want to do business. The closing arena is notorious for its lack of standardization, and technology helps to aggregate and deliver this information back to the lender in a way that makes it easier to assess and compare.
A lender should know, for example, how the rates they receive from providers compare with other players in those local markets. Technology can improve support for scorecarding, keeping track of trends, and offering historical data in conjunction with real-time data that can offer actionable intelligence and improve vendor selection. It allows for better communication and sharing of information between lenders and providers, as well as a means for lenders to monitor provider practices. ClosingCorp continues to recognize how important technology is to helping lenders meet regulatory requirements.
Q:Â Understanding that many lenders are using internal resources such as tables and templates to produce good faith estimates and with the new rules in place, what's the risk of keeping this time-consuming process?
Benson: The risk is that it will not work adequately to keep them compliant, so they will be writing a lot of checks for various violations and fines. The fact is, it is brutal to manage, it is difficult to maintain information accuracy, and there are many single points of failure when you manage it internally. We see it quite frequently: smaller institutions scrambling because an employee left the business – the procedures are not documented in a manner that affords consistency, etc. With regulatory changes to the way fees are disclosed being a moving target, increased focus on the e-closing program, the need to conform to Uniform Closing Dataset requirements from the government-sponsored enterprises and other similar initiatives, the pressure to keep up is only going to become more intense. It is pretty clear that lenders need good technology partners to comply with requirements.
Q: What do you tell your own employees about regulatory changes their clients are likely struggling with?
Benson: Having a tremendous amount of empathy is what we strive to provide. Lenders have an extremely difficult job keeping up with change and compliance, and for the most part, they do a really good job of it. Our company does spend quite a bit of time teaching our employees about the regulations themselves.
Participating in industry webinars is paramount, and we invite all employees in to monitor them. We also examine activity from the CFPB, Office of the Comptroller of the Currency, the states and other regulatory entities and then compile the issues into bigger themes and share our interpretations across the organization. On a monthly basis, we meet to ensure no issues have fallen through the cracks.
We remind our employees that we are not in a position to offer legal advice or anything that could be conceived as such – however, we do encourage them to talk with their counterparts and try to get a better understanding of how the industry is interpreting the same information.
Q: When do you see the industry reaching the ‘light at the end of the regulatory tunnel?’
Benson: I believe the current focus on compliance will be with us for awhile. There is a certain level of denial on the part of some lenders and some degree of hope that this will eventually go away. Given that most of what the CFPB has done has received strong endorsement from the industry and does reflect improved business practices that are designed to enhance the consumer experience, the likelihood of this disappearing is next to zero.
The unfortunate fact is that some lenders just will not be able to survive. You can see some consolidation already taking place – from smaller institutions that have, in effect, thrown in the towel because they do not see themselves being able to keep up. I anticipate others will follow suit over the next year. One thing is certain: No lender will survive unless it has a firm and well thought-out plan. The one constant is change. With so much at stake, it is imperative that lenders choose good partners that can help them remain competitive and compliant, no matter what the future may bring.