A couple of weeks ago, PerformLine hosted a mortgage industry roundtable that gathered mortgage leaders to discuss best practices for ensuring compliance and consumer protection as we continue into a year of increased regulatory pressure.
I always love hosting these roundtable discussions, and I had a great time chatting with attendees. Here’s a recap of a few things we discussed during the event.
Evolving Regulations + Fair Lending Are A Top Regulatory Concern
The Consumer Financial Protection Bureau (CFPB) has been focused on fair lending and has been very engaged with what’s happening as it applies to redlining, appraisals, and the impact that data inputs have had on credit decision-making for both mortgage lenders and servicers. The Bureau has been fairly quiet lately…but it seems they’re ramping up under new leadership, and this is likely the quiet before the storm.
From what we’ve seen already, Director Rohit Chopra doesn’t hesitate to make investigations and enforcement actions public. We can likely expect to see a lot more demand letters, examinations, and enforcement actions over the next few months. For these enforcement actions, I think that they’ll have larger penalties and larger fines than we’ve seen in a while.
Loan Origination
In 2022, the demand for housing will likely continue as rates are still fairly low, but as rates rise, consumer demand will likely slow. Refinancing is down because interest rates are going up. It will be interesting to see the impact that this has on staffing at some of the larger mortgage companies that greatly depended on the refinance business.
From a compliance standpoint, it’s important that you’re staying on top of how loan originators are marketing themselves and who they’re marketing to. Make sure that your marketing is both fair and inclusive. Do not avoid neighborhoods-engage in neighborhoods! And, if you’re buying leads, do your due diligence to make sure that they’re coming from a diverse population of consumers.
Redlining
One of the roundtable attendees asked: What are some example actions that the CFPB has taken against digital redlining?
The most recent example was an enforcement action that the CFPB took back in October of 2021, in conjunction with the DOJ and OCC. The agencies found that this mortgage lender discriminated against Black and Hispanic neighborhoods by deliberately not marketing, offering, or originating home loans to consumers in these neighborhoods and discouraged consumers residing in or seeking credit for properties located in these neighborhoods from applying for credit.
Preparedness = Compliance
I cannot stress enough the importance of being prepared to avoid potential enforcement actions and to ensure compliance with fair lending and other consumer protection laws.
Here are a few of my top tips for staying prepared that I shared with attendees during the roundtable:
- Ensure that training, policies, and procedures are updated regularly
- Alert the board of any potential fair lending risks
- If you’re using AI, but don’t understand the inputs, now is the time to “peel the layers of the onion” and learn. You have to understand how AI and algorithms are being used within the mortgage process
- Understand your potential pitfalls and focus on those
- Stay on top of regulation and focus intentions on how to best position and protect your company
Here at PerformLine, we’re constantly staying on top of regulatory news and happenings and reviewing and updating our industry rulebooks to help us better prepare our clients.
Implications of CARES Act
Over the last year, there have been some collaborations between the CFPB and State AGs for enforcement and oversight. Director Chopra has called on his office to “find new ways to expand the State enforcement authority of federal law, including by clarifying States’ rights to pursue a number of violations directly under the CFPB Act.”
With the effects of the pandemic slowly dwindling, forbearance is ending this year. Mortgage servicing will be a hot topic for 2022, and there will be a lot of eyes on these servicers to ensure that consumers are protected.
Loan Officers and Social Media-What’s The Risk?
Social media is an excellent tool for loan officers to drive business, but it doesn’t come without risks.
One roundtable attendee asked: We’ve seen a lot of instances where a regulator gets wind that there’s a potential disparity at your company. How much of an issue is it that your social media posts will come into play? Does that show additional evidence of fair lending?
To answer this, I always say that anything is on the table for regulators to look at. They’re looking at HMDA data for disparities. How many people are coming in and seeking loans? How are you doing with various classes of people? If you are a brick and mortar, where are your branch locations? Are your LOs getting out to different areas? What are they saying on social media?
Your company should be thinking about ALL of this-don’t put yourself into a position to be seen as not taking extra efforts to hit those in certain demographics or areas!
Loan Officers on TikTok
When it comes to TikTok, the rule of thumb is that posts on this platform should follow the same regulatory rules and best practices for any other social platform, such as putting proper identifiers, disclosures, etc.
As TikTok popularity continues to grow, it’s possible that regulators will want to see loan officers’ posts and accounts, so it’s best to be prepared for that and take the steps to ensure that your loan officers are following compliance guidelines and best practices.
Best Practices for Monitoring Stories, Reels, and TikToks Across Platforms
One of the topics I chatted with roundtable attendees about is, how are they approving and monitoring content across so many different platforms and content mediums?
One attendee said that they use a compliance technology platform (like PerformLine) to continuously monitor social posts shared by their loan officers.
Another attendee said that they require content to be submitted for compliance review and approval prior to posting.
We then started talking about compliance concerns on platforms like Instagram and Facebook that allow you to share a number of different content mediums (i.e, a post on your feed, a reel, or a story). How can you monitor ALL of these different places for compliance? Especially things like stories that expire after a certain amount of time, because if you don’t catch it in the moment, it’s gone.
One attendee shared their organization’s practice for this: they require all posts to be shared on their loan officers’ main feed first, that way they can easily monitor it from a consistent source. Then, once it’s been approved for their main feed, they can then share that content on reels, stories, or across other social media platforms, because it has already been reviewed and approved at that point.
Community Reinvestment Act and Mortgage Lending
One question that really got attendees chatting was around the rumors of the Community Reinvestment Act (CRA) requirements being applied to mortgage lending, specifically the recently enacted requirement in New York State. One attendee mentioned that there’s not currently a lot of information on how they’re going to measure compliance, so putting protections in place is a challenge.
Luckily, one of our other attendees was really knowledgeable about this topic and was able to provide some insight. He shared that Illinois and Massachusetts both have CRA in place for mortgage companies. Specifically, Massachusetts has been doing this with mortgage bankers for quite some time, and both Illinois and NY have replicated their laws based on this. He recommended checking out what Massachusetts is currently doing for some insight into what you can expect. A few attendees also spoke about California’s plan to enact and that it will be important to stay close to updates as it appears that if enacted, it could have some of the toughest requirements out of them all.
Required State Disclosures
One attendee was curious as to how others are approaching state-required disclosures.
When I was in my previous position, we started conversations with the MBA to try to get states to streamline some of the disclosures, but it never went any further. Hopefully, it is addressed as no one intentionally omits them, and knowing which states require or not can be difficult to track.
Attendees shared how they handle the many arms of compliance. Here are a few key takeaways:
- AllRegs and Ncontracts are great tools used by a lot of our attendees
- Annual reviews and audits at the beginning of the year are helpful to see where your organization stands to make any necessary updates
- Implement a change management policy for when new states requirements are added
- Work with your legal team to periodically review disclosures
- Use AllRegs in conjunction with PerformLine to build state disclosure rulebooks to monitor marketing materials for compliance
Interested In Attending Our Next Roundtable?
Here at PerformLine, we’re always looking for ways to connect with other compliance professionals to discuss the latest. At our roundtables, there is no one expert in the room-you are ALL experts! When you join us, we hope that you will turn your camera on, bring your voice, and be open to sharing your thoughts and best practices. Mostly, we want you to be prepared for an engaging conversation with others that simply want to connect with like-minded professionals. In the end, we simply want to use these roundtables as an opportunity to build relationships with others, as we all know that compliance can be a very lonely space.
Check out some of our upcoming events here, and sign up below to be notified of details for our next industry roundtable event.
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