I cannot say I was surprised when I saw the recent poll results from our group; indicating that merging compliance into the workflow was a top concern. After all, we just started to smooth out the loan process when the whole industry blew up. Now that regulation is beginning to stabilize we have the opportunity to squeeze in best practices for Fair Lending into our workflow.
Today, I would like to focus on the basics of the compliance management system that the examiners are seeking. From there I will write about each position down the line until closing.
Compliance Management Systems Require 3 Workflows.
- Training
- Policy & Procedures
- Monitoring
Training:
When you are introducing a new concept like Fair Lending compliance or Disparate Impact there is going to be a lot of resistance. Comments like “the only color I see is green” will abound, because what the examiners expect us to demonstrate, is beyond what we are used to. A formalized training program allows you to provide repetition of the concept, demonstrate the employee knowledge through testing and provides a base for your company expectations. Depending on the size of your company, this can be performed internally or through a third party. The important part is that it is expected, normal and completed.
Policy & Procedures:
Policies and Procedures are your next hurdle. I know a lot of you have “boiler plate” policies and procedures. The good news is that you have something. The bad news is that the CFPB doesn’t like or accept “boiler plate” policies and procedures. They want to know that you have gone through the thought process, made them specific to your company (beyond changing the name in the document) and that as part of your compliance management system, set expectations to the employees who will be responsible. The CFPB will test this by asking the employee about certain policies and procedures, and based on their answer, they know if the staff has been taught and is monitored.
Monitoring:
The last area in your workflow is monitoring. So you made all of these rules and they look good on paper. The examiner is impressed with the work flow models you developed and the policies and procedures you have written. Unless…..you have no monitoring in place! Your expectations as communicated in the training and policies and procedures must include monitoring. Whether a technology does that for you, a spreadsheet or some other viable format, monitoring documents the understanding and adherence to the expectations you have set for each position.
Tomorrow I will start with the loan originator position and help you build workflows position by position.
Stay Tuned! Also, feel free to share your ideas on what you do in your company as we move through each position.
