What do the following have in common? HMDA, Fair Lending, Suitability, Arbitration, CRA, Ability to Repay, Interchange Fees, Credit Freeze, Risk Retention, Appraiser Independence, FCRA, ECOA. The answer is, they all have been regulatory and compliance hot topics in the last 60 months or so.
They are all evidence of the ever-changing regulatory environment that lenders face in the current climate. However, one facet that these topics don't represent is also significant: they aren't directly computationally oriented. At the moment, the regulatory pendulum is swinging markedly away from calculation type issues.
Yes, we had the Reg. Z MDIA mortgage disclosures at the beginning of 2011 that did have some direct impact on loan disclosures and calculations. It certainly made all of us contemplate combinations of potential loans that we didn't even know existed. But we seem to have survived that window of activity and we'll see what kind of feedback regulators receive once those disclosures have been in use for a year or so.
But when you look at that laundry list of regulatory initiatives, it is clear that direct calculation issues are on the back burner, barely keeping lukewarm. That merits the question of whether that is by design, or have all the other issues simply pushed them into the background where they can't be seen clearly.
Understand, I'm not championing a new era of calculation-driven regulation, even though I think that's in the back of everyone's mind waiting on the CFPB. Besides new calculations that could potentially arise during upcoming rule making, there also needs to be a focus on explaining existing calculations. Remember the mandate from Dodd Frank for plain language, simplicity, and transparency.
There are times it makes me a bit nervous that perhaps inaccuracies and imprecision are being overlooked because of the concentration on other administrative type subjects and issues.
The worst nightmare is a frenzied tweet from the compliance staff, "OMG you should have seen what the examiner just cited us for," and to find out that practice/calculation /disclosure has been in place since 2003. It's just been obscured and overlooked because of the focus on compiling tons and tons of database information for various governmental agencies.
Don't get caught off guard. Sure part of this concern is my general paranoid nature, especially when things seem to be running incredibly smoothly, but I think it's essential that internal controls focus on all aspects of compliance and not just the ones with steam rising off the top. Make no mistake, the pendulum will swing back the other way at some point. Be prepared.
Wednesday, September 21, 2011
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