Creating a Culture of Compliance

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Creating a Culture of Compliance
February 2014
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When was the last time that a risk assessment was performed to identify all the loan products, which departments were affected in originating them, and what staff are responsible to effectuate the origination? 
Residential mortgage lenders and originators may offer some, or all, of the loan products subject to the Ability-to-Repay (ATR) and Qualified Mortgage (QM) rule promulgated by the Consumer Financial Protection Bureau (Bureau). 
But originating those loan products starts with identifying the loan flow process itself. 
I hope you enjoy the article!
President and Managing Director 
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Consider this: the ATR and QM rule is just one component of the Bureau's Dodd-Frank Act Title XIV rulemakings! 


Here are a few other rules that are now the law of the land:


  • 2013 HOEPA Rule
  • ECOA Valuations Rule
  • TILA Higher-Priced Mortgage Loans Appraisal Rule
  • Loan Originator Rule
  • RESPA and TILA Mortgage Servicing Rules
  • TILA Higher-Priced Mortgage Loans Escrow Rule


Some of these rules are directly and indirectly intersected, interlocked, overlapped, interfaced, and cross-tabulated; they are correlated, tabularized and re-tabularized, re-ordered, enumerated and re-enumerated, re-codified, and, generally, comprehensively systematized. 
Each of these rules affects one or more aspects of the loan origination process, organizational structure, and risk exposure. So maybe the great American humorist was on to something!

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I will outline the key questions that should be asked, the answers to which will determine the extent, depth, and integrity of a culture of compliance. I am going to take you through a set of questions that will form the basis of a self-assessment. 
This type of internal review should be undertaken in order to set a baseline and determine progress towards compliance with mortgage acts and practices, and certainly the new mortgage rules.
During any such evaluation, keep in mind that this is a due diligence process which is subject to an institution's size, products offered, risk mitigation, complexity, and overall strength of the existing compliance management system. 

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The Bureau expects institutions to comply with all relevant provisions by the effective date of each rule. Policies and procedures should be updated to ensure that employees fully understand the changes prior to the effective dates. Indeed, the Bureau expects to assess policies and procedures in a timely fashion. It will implement robust transaction testing. 
You should be prepared to discuss your implementation plan and policy changes.
Remember: the Bureau, in carrying out its mandate, will coordinate with other regulators, and those regulators, state and federal, will communicate examination plans and findings with each other. When appropriate, the regulators will coordinate examination efforts. 

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Lenders Compliance Group, Inc.
167 West Hudson Street - Suite 200
Long Beach, New York 11561

LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the United States specializing exclusively in outsourced mortgage compliance and offering a full suite of services in residential mortgage banking for banks and non-banks. We are pioneers in outsourcing solutions for residential mortgage compliance. We offer our clients real-world, practical solutions to mortgage compliance issues, with an emphasis focused on operational assessment and improvement, benchmarking methodologies, Best Practices, regulatory compliance, and mortgage risk management.
This newsletter is free to subscribers, clients, and colleagues, who also regularly receive our free Mortgage Compliance Updates, Publications Notices, and Commentaries.
Information contained in this email is not intended to be and is not a source of legal advice. The views expressed are those of the contributing author, as well as news services and websites linked hereto, and do not necessarily reflect the views or policies of Lenders Compliance Group, any governmental agency, business entity, organization, or institution. Lenders Compliance Group makes no representations concerning and does not guarantee the source, originality, accuracy, completeness, or reliability of any statement, information, data, finding, interpretation, advice, opinion, or view presented herein.
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