When the CFPB announced the passage of a newly consolidated regulatory framework in November 2013, the mortgage default servicing industry knew that change was coming. That change is no longer a future possibility, but an immediate reality, with a revised start date of Oct. 3, 2015.
The new disclosure rules will replace the Truth in Lending Act and Real Estate Settlement Procedures Act with the TILA-RESPA Integrated Disclosure (TRID) guidelines. In addition to a new acronym, the unified set of guidelines includes new and revised forms, new disclosure obligations and new timelines.
To get a sense of how disruptive the new disclosure rules may be for organizations that are not adequately prepared for the upcoming changes, we need look no further than an April 15 article that appeared in this very publication. The article reported that more than two out of five mortgage lenders feel “they are not prepared to meet the August 2015 deadline,” and quoted Sanjeev Malaney, CEO of Capsilon Corporation, who explained that “…many lenders don’t have the right technology in place to handle the requirements of TILA-RESPA, and are scrambling by hiring more labor to help close the gap….” Malaney’s claim was based on the results of a survey of more than 100 mortgage lending executives, two-thirds of whom revealed that “they hired additional in-house staff or use third-party compliance firms” to address expanding regulatory obligations.
In the mortgage default servicing space, we need to work to avoid that inconsistent response, primarily through the implementation of new technologies and new systems designed to be flexible and adaptive in the face of new regulations. Understanding the value of these systems—and the features they include—should be a priority for any servicing professional.
THE TECHNOLOGY DIFFERENCE
Significant regulatory changes such as the upcoming TRID rollout serve as compelling reminders that today’s mortgage default servicing industry requires quality technology that is both well-managed and well-maintained. To optimize efficacy, every link in the servicing chain needs to have a strong technological foundation: As a community, we have to work together to commit to a coordinated and consistent approach.
The basic principles are straightforward: Systems need to be flexible enough to change when new regulations come down and powerful enough to handle the operational and regulatory demands placed on them — everything from documenting and dating changes, to managing data and structuring files
and reports.
DATA MANAGEMENT
It’s not just being able to manage the data, but having that data on hand. Documentation demands are so much higher today, and compliance timelines are measured in hours and days, not months and quarters. Reports need to be generated quickly, and processes maintained in a defensible and repeatable fashion.
Working against that level of accuracy and rigor is a legacy of systems that rely on case notes filled in with free text fields. This creates unstructured “dirty” data that is inconsistent and generally not repeatable. The best new technology platforms utilize standardized data input with bundled data capture functionality that systemically reports specified data—including detailed documentation about any changes made to that data.
In conjunction with that level of data management, having a structured document management system is also important—particularly at a time when there is growing demand for the fully documented life cycle of individual files. If you have the data and the documentation, it is relatively easy to put together the detailed life cycle of a file.
CHANGE MANAGEMENT
Perhaps the single most important aspect of any systemic technology solution is its ability to facilitate seamless and streamlined change management. Challenging new regulatory demands have exerted such pressure on law firms and servicers that pulling people out of circulation to engage in structured training isn’t realistic. Consequently, organizations need to work smarter and not harder by integrating sustainable technology practices.
When new rules or processes come down, it can be challenging for law firms to adapt quickly. Because of this, workflow changes need to be easily reflected in the technology. Today, cloud-based technology in particular is helping make that happen. The cloud adds transparency and confers the ability to see how new changes are impacting the system—also making it easier to roll back changes when needed.
Firms can also help themselves by being strategic about process changes and not over-managing. Be clear what each change will look like and what it is intended to achieve. Finally, maintain your technology. Cost of ownership skyrockets if investments and upgrades are allowed to lapse over time.
In the face of new regulatory mandates, organizations that fully and strategically embrace flexible and powerful new technologies and sound management principles will help to create a model for automated compliance going forward.
