Servicing Management Archives - Cogent QC: Award-Winning Loan Quality Control & Compliance Software

Perspectives on the New Normal in Mortgage QC and Compliance

February 24, 2014 By Kaan Etem

Several articles in the last week have provided useful insights into the mortgage industry’s new regulatory environment and its impact on lenders’ and servicers’ business models. In no particular order, we suggest the following:

Fates of Bank and Nonbank Servicers Intertwined: MBA Chair-Elect

“The rapid growth and increasing regulatory scrutiny of nonbank mortgage servicers could “severely” affect the whole industry, Mortgage Bankers Association Chairman-Elect Bill Cosgrove said. “…we are keeping a very close eye on ongoing regulatory activities aimed particularly at nonbank servicers,” Cosgrove said in prepared remarks. “Nonbank firms have become an increasing part of the servicing ecosystem, and it is clear that they have captured the attention of regulators and policymakers.”

Tight Margins and Reg Changes Prompt New Interest in Outsourcing

“Lenders remain reluctant to outsource for control and liability reasons. But with volumes down and compliance expenditures up, more have, particularly among midsized firms with limited resources.”

Inside look: What mortgage servicing really needs

“According to… panelists, the compliance burden and need to add additional controls and oversight tripled compliance expense over the last couple of years. At the same time, the revenue has been flat and in some cases we have even seen compression in the top line as the bid for MSRs increased.

“But there was general agreement that the current economic model is tough (to put it mildly) for a new servicer, and it might be impossible for a new mono-line single-focused platform in today’s environment.”

Six Strategies to Cope with Servicing’s ‘Compliance Crisis’

“We’ve gone from a default crisis to a compliance one.” How to cope:

Crunch the numbers
Get big or get a partner
Check yourself
Find opportunities
Keep an eye on originations
Mind the big picture

Investors Drawn to Servicing as Banks Retreat

This one is from September 2013 but gives a sense of who the new players in servicing are and why the traditional players are scaling back.

“Private-equity firms and hedge funds are increasing their control of the rights to collect America’s monthly mortgage payments, an almost $10 trillion market that banks are retreating from amid looming regulations.”

“Quality Control and the Bottom Line” article by Cogent in Secondary Marketing Executive magazine

February 3, 2014 By Kaan Etem

Secondary Marketing Executive magazine has just published in its February issue an article penned by Cogent SVP Kaan Etem on “Quality Control and the Bottom Line.” The article summarizes much of Cogent’s thinking about efficient and effective quality control, its potential impact on the bottom line, and related commentary on some of the new rules being introduced by Fannie, Freddie, and HUD. We hope it’s useful. Let us know what you think.

New Mortgage Servicing Rules Take Effect

January 13, 2014 By Kaan Etem

The new mortgage servicing rules that the CFPB finalized in January 2013 became effective January 10, 2014, affecting the Truth in Lending Act (TILA) under Regulation Z and the Real Estate Settlement Procedures Act (RESPA) under Regulation X.

The amendments are intended to provide borrowers with detailed information regarding their loans, ensure that mortgage servicers do not unexpectedly assess borrowers with charges and fees, and ensure that borrowers are informed of alternatives to avoid foreclosure. The final rules should also provide borrowers with more timely and accurate responses to their complaints by requiring servicers to follow certain error resolution procedures.

As a servicing QC and compliance professional, you have already been preparing for the additional information and data tracking requirements, as well as the process changes. With luck, your auditors are trained and ready. And your software has been updated and tested to reflect the changes.

If you’re a Cogent client, this means you have updated your audit questions and implemented the appropriate question trigger rules. Maybe you’ve introduced additional findings options and workflow updates and configuration tweaks. Alternatively, you may be puzzling through how to put the pieces together most efficiently. If so, let us know at info@cogentqc.com. We are here to help.

Lenders’ Dilemma: Invest in Tech or Exit Mortgage Business

October 28, 2013 By Kaan Etem

Here’s a timely article (registration required) highlighting how the new regulatory environment for lenders is forcing a stark choice: either invest in technology to streamline and automate loan origination and servicing processes – or exit the business.

Some choice excerpts:

“Origination costs are expected to rise 11% this year from a year ago, to nearly $5,900 per loan, as lenders scramble to meet tough new requirements from the Consumer Financial Protection Bureau, the Federal Housing Administration and Fannie Mae and Freddie Mac that take effect in January.”

“Large banks can justify investments in technology and can hire more staff because they spread the costs across more loans. But small banks with fewer than 100 employees may only have a handful of employees doing the work, which means relying even more on technology…”

“…921 compliance changes [have been documented] from various agencies since the housing market crashed in 2008. Particularly challenging for small lenders are new requirements from Fannie and Freddie that require lenders to deliver loans with as few defects as possible.”

“The government-sponsored enterprises are now electronically validating 100% of the loans they purchase as part of a broader initiative to improve loan quality. The Federal Housing Administration has proposed similar changes and may set a maximum threshold for the percent of loans it will allow to have defects.”

“Survival is dependent on improving quality control standards otherwise [lenders] won’t be able to compete or to sell loans that the GSEs will be willing to buy,” says Craig Focardi, CEB TowerGroup’s senior research director.”

“Everybody is extremely nervous because if you don’t dot your i’s and cross your t’s in compliance, you’re going to get a lot of repurchases and will be out of business. Everything in a loan file has to follow the letter of the law.”

“Many lenders don’t want to invest in the labor and technology that it takes for [quality control] and compliance,” says [Annemaria Allen, president and CEO of The Compliance Group in Carlsbad, Calif.], noting that such requirements have never really been enforced to the degree that they are now. “You have to be able to slice the data and we know that business units are screaming about this. But if you’re going to sell to Fannie and Freddie and you do a [lousy] job…they will be in your house nonstop and make sure you have the processes in place and embrace quality.”

Forewarned is forearmed. It’s a very different industry now than it was in 2007.

MBA’s Risk Management & Quality Assurance Forum 2013

September 10, 2013 By Kaan Etem

If you’re attending the MBA’s Risk Management & Quality Assurance Forum in Phoenix, AZ this week, stop by Cogent’s booth and say hello to our own Hakki Etem and James Robinson. And if you’re a client, we look forward to seeing you at dinner on Wednesday evening.

There are several interesting and topical sessions on the agenda this year. One session we’ll be paying particular attention to is “Using Sampling Techniques to Manage Quality in Your Organization,” a topic that is near and dear to our hearts.

The rest of the schedule is here: https://events.mortgagebankers.org/RMQA2013/sessions/#INFO

More information about the event here: https://events.mortgagebankers.org/RMQA2013/default.html

See you there!