Image by Peregrine Blue 

As a consequence of the financial crisis, we are undergoing wholesale change in the regulatory environment of real estate finance.  The changes are coming hard and fast and continuously, making it difficult to establish and manage new business processes.  How do you keep up?

There’s no single answer to this question.  We have clients who take it on themselves to keep abreast of regulatory changes because they want full control over their regulatory compliance.  Other lenders want to outsource the management of change and turn to third parties to keep them up to date.

Wherever you fall in the spectrum, you will probably welcome any tools that ease the burden of staying current.  And such tools are cropping up.  For example, Wolters Kluwer has just launched “The Reg Z Center“, a free online resource which provides an overview of the changes affecting loans covered by Regulation Z, the effective dates for changes and suggested solutions for implementing changes.

Being a for-profit entity, the company does promote its compliance solutions on the site.  But this is in keeping with the ‘Web 2.0’ business model, whereby useful information is provided for free, interaction among interested parties is encouraged (via a forum, blog, or discussion group), and a long-term relationship is cultivated while simultaneously establishing credibility.

The Reg Z Center joins the company’s other similar resource centers for Fair and Accurate Credit Transactions (FACT) Act “red flags” and the Real Estate Settlement Procedures Act (RESPA).

It’s official.  Version 2.0 of CogentQC.NET has now been released.  You may have seen the news in Housingwire or MortgageOrb but if not, you can find the Cogent news release here.

2009 was an unusual year for client IT departments (unless it’s actually “the new normal”, God forbid.)  After the mortgage crisis and economic meltdown, it seemed like IT staffing and budgets were reduced and lenders were stuck in neutral, reluctant to take any steps other than cost-cutting.  IT staff had too many projects to handle and consequently Cogent saw only a handful of clients upgrading to CogentQC.NET.

However, the end of 2009 saw an acceleration of activity.  We now have enough upgrade projects to take us through the first quarter, at least.  And as business gets back to normal, we have even begun to talk with clients about enhancements to their systems that will automate and optimize more of their business processes.

It’s going to be a busy year.

If you’re interested in the world of mortgage servicing, MortgageOrb has just published an interesting overview of the major milestones of 2009 and what to expect in 2010.  With input from several industry veterans, the article surveys the changing role of the servicing function, the performance of various government programs designed to ease the mortgage crisis, the conflicts of interest between servicers and investors, the potential impact of millions more ARM resets due in 2010 and 2011, and more.  Well worth a read.

One of our favorite websites is www.informationisbeautiful.net, where David McCandless, an independent London-based “visual & data journalist” (his words) practices the art of data visualization and information design. 

We like the way he conveys information, often multi-layered, with the minimum of words.  As he puts it, “I’m interested in how designed information can help us understand the world, cut through BS and reveal hidden connections, patterns and stories underneath. Or, failing that, it can just look cool!”

It’s that last bit that we want to talk about briefly here.  One of David’s recent creations is a graphic that compares, side by side, point by point, the assertions of “The Global Warming Skeptics” against “The Scientific Consensus”. 

This particular visualization is more wordy that most of his work.  For that reason, one is inclined to think that a lot of research went into it.  And that is the case.  Every familiar argument made by the “skeptics” seems to have been researched and refuted.  If you’re a believer in global warming, you might think that this is close to the final word on the debate. 

Yet one look at the comments section at the bottom of this page suggests otherwise.  It’s worth spending a few minutes examining the visualization and then the comments.  That should be enough to convince you that a beautifully presented argument is not proof.  It has to be backed by solid evidence.  And if there’s any debate that lacks conclusive data, it has to be the global warming issue, where complex meteorological phenomena meet millennial time spans in a cauldron of scant measurement.

We came across a well-written article recently titled “The New Rules For Compliance In The Post-Crash Environment” by Louis Pizante, CEO of Mavent, Inc. and a veteran of the industry. 

In addition to a concise synopsis of the events leading up to the current regulatory overhaul of the mortgage industry, the article outlines some of the changes we can expect in the way compliance reviews are performed.  In short: earlier in the origination process, more electronically and with greater automation. 

Mortgage compliance and quality control reviews can and should be performed on many levels, and at different points in the loan life cycle.  Tools such as automated compliance engines, automated fraud engines and automated valuation models can flag loans that merit further review.  The next step is to apply a rigorous methodology to digging deeper in order to:

1) determine whether a complete file review confirms the automated findings;2) fix the individual loans if possible;3) identify the source(s) of the issue(s);4) select additional loans from these source(s) and conduct complete file reviews to see if there is a pattern of issues;5) generate feedback to the field and document corrective actions to fix the flaw(s) in the origination or servicing processes and/or stop doing business with the identified sources.

We are seeing more tools for automating more aspects of the mortgage life cycle.  Don’t forget, though, that it was partially the over-reliance on automated underwriting tools that got us into our current mess.  Maybe tomorrow will be different, but today we still need human beings checking to see if it all makes sense.