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2013 is the year of stop, re-engineer, monitor and audit for all of the new regulations heading your way in January of 2014. The largest lenders in the country are taking this approach, and focusing on regulation for good reason. They see the examples of other lenders who have faced fines, oversight and complete disruption to their business.
I am fortunate that I get to hear what many lenders are doing to prevent an exam catastrophe. I thought it would be helpful to pass along how they are allocating resources to implement new regulations and pass a CFPB exam. Just a small warning to those who have been through the exam and still do not have your results; don’t allow complacency to slow you down regarding fixing what examiners gave you hints about. Stay highly proactive and in the re-engineering mode to demonstrate that you have learned from what the examiners discussed with you already.
Tip One: “The way we did it, or this is the way we have always done it”, no longer applies! Whether you are a compliance person with 30 years under your belt, a production manager, or the secondary guru, the way we are expected to do business has changed dramatically. This means stepping outside of our box and taking an outsiders look at how to re-engineer your entire process.
Tip Two: Most of your resources should be reallocated to this re-engineering process. New initiatives are great, but only after the other work is done.
Tip Three: Get very serious about Vendor and TPO management. This involves contract revisions, site visits, review of their policies and procedures and a plan as to how you will monitor that relationship going forward.
Tip Four: Break it down! Every position, duty, technology, data flow, or process needs to be re-evaluated for compliance, efficiency and a positive consumer experience. Do not make the mistake of putting everyone in their same spot because you have done it that way for years. You may have to change position responsibilities, get rid of a technology you’ve had for years, or hire new positions like a project manager.
Tip Five: Once you break it down, it is time to re-engineer. Ask the consumer facing employees the types of policies or procedures that cause chaos or poor customer service. Develop a direct and anonymous channel to a decision maker if someone in the chain is not doing something they need to do. It is much better to know and deal with that one situation, then to find out in an exam what you didn’t know.
Tip Six: Data flow, Data Capturing and Compliance Management.
1. Mind Map your entire process from a high level overview.
2. Then take each section of the Mind Map and develop that. Continue this process until you reach the consumer interface.
3. Now, take a look at how data enters your company down to the field level. Map out how it flows through your process and where you have the hiccups. Then allocate resources to immediately fix the gap.
4. Set up compliance a management system that runs oversight and monitoring on every aspect of your business.
Tip Seven: Run regular mock audits, look for issues, create action plans to fix the issue and execute those plans! Pretending it will not happen to you will only cost you money, time and potentially your business.
Need more encouragement? If you do this now…..
A. You will not have to worry about being monitored for the next 4-6 years by the examiners who require you to hire third-parties to exam everything that you do. That is a lot of money!
B. You will not see your name in the press as the “bad lender”.
C. Your employees will feel like they are with a company that is “doing the right thing” and think twice before leaving. Attrition is costly!
D. You will be able to focus on getting more business in the door, versus wondering how well you will hold up in an exam, or dealing with the fallout after an exam.

Tammy Butler, Master CMB

Author Tammy Butler, Master CMB

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