Each day I speak with frustrated compliance folks about the issues they face in compliance. That is a great position to be in, because it helps me to keep a pulse on the market and work toward the development of solutions.
One of the bigger issues is what I refer to as “herding the cats”, which is your frontline. As the face of your company they can get you into, or keep you out of, trouble with the regulators. Now that originators are licensed, and pending settlements are likely to involve personal responsibility and remediation from mortgage originators; there was never a better time to protect and organize that exposure like there is right now.
In fact, Wells Fargo just entered into a settlement because some frontline employees conveyed the message of “once you have a baby you are likely to stay home so we can’t use that income”. Clearly those employees didn’t learn from the Bank of America settlement.
That issue reminds me of a time when a HUD underwriter asked me to get a letter from my client’s gynecologist stating that she was on birth control. When I questioned this she said that as a young couple who just got married I should have that in my file, so that she can use the income. Why? Well, she continued, it is likely that she will stay home once she starts having children.
Yes, I am so vintage that my FHA loans in the beginning of my career were underwritten by an underwriter at the Washington DC HUD field office, and not by a person in my own office. I spent many a day sitting in the Washington DC HUD office waiting to speak to an underwriter. This was before Direct Endorsement and we were so happy when HUD allowed lenders to underwrite. So as you can see we have come a long way but still have a ways to go!
So while you are organizing the paperwork, technology flow, processing, underwriting, closing and servicing, don’t forget that your greatest compliance gap is the engine of your train. This week I will focus on writing some tips about how to keep the frontline engaged in the compliance process. Now don’t laugh too hard, it really can be done without too much pain!
I am really hoping that these words reach the right people in your company. If not, please feel free to forward this to those who may need this information. Stay Tuned!
