Posted by Nick Zabran | Opus CMC | Date: 15 Oct 2015
There are few industries as dynamic as the mortgage industry. And few periods have been as transformative as the last seven years. The changes in the mortgage business have been driven by many factors, not the least of which is the regulatory environment. And just as compliance has changed, our Quality Control measures should change along with it.
Knowing there is a need for change is one thing, knowing what or how to change is something else entirely. How do we transform our QC processes to adapt to new regulatory requirements? What are the focal points for Quality Control going forward? What is Quality Control?
Quality Control is Borrower-centric: It seems obvious at a glance, but in practice, that hasn't always been the case. Prior to regulatory change, many businesses operating in the mortgage and lending space would prioritize the impact that loan infractions had on a business rather than on the borrower. But given the high stakes surrounding regulatory compliance, the two are more intricately entwined than ever. Minor infractions can have major business implications. In an era of heightened regulation, heightened scrutiny, and heightened penalties— heightened QC practices are essential.
Quality Control is Enterprise-wide: Compliance Quality Control has become all encompassing. It involves the oversight of servicers and vendors. It entails the way products are marketed. It covers the communication between business entities, counterparties and customers. It involves data security, storage and transmission. Compliance QC can no longer be relegated to a back-end analysis of disclosures. Quality Control is an institutional practice.
Quality Control is Systemic: There are no isolated incidents. With regulation pushing tolerances and acceptable margins of error ever closer to zero, comprehensive Quality Control must involve continuing analysis of the processes, procedures and systems that the business employs. Curing a loan is no longer adequate.
Quality Control is Proactive: The benefits of identifying problems early are self-evident. Comprehensive Quality Control starts with integrated Quality Assurance at the earliest stages of a loan. The potential costs cascade the further down the line an issue is identified. A company benefits when employees are trained and incentivized to identify and handle problems before they become exceedingly costly to solve. New systems and updates need to be rigorously tested prior to adoption and implementation.
Quality Control is Transparent: Transparency is a buzzword, but it has serious real-world implications. The regulations require it. The headlines punish its absence. But external factors aside, transparency aids progress. Organizations that are open and honest are organizations that are adaptive, capable of learning from mistakes, and less prone to be blindsided when problems do arise.
Quality Control is Expensive: Perhaps the biggest challenge in adopting effective Quality Control is the sheer cost. It involves hiring additional personnel and extensive training of existing employees. New systems and technologies need to be purchased. Policies and procedures require updating. There are no shortcuts, but due diligence is poised to play a transformative role. As obtaining independent analysis becomes more difficult to obtain within the lender's or investor's institutional environment, finding the right third party review partner is critical.
With a focus on leveraging technology to drive transparency and an unrelenting commitment to integrity and objective analysis, Opus CMC gives our clients access to a wealth of mortgage talent and training without the long-term expenditure and commitment. In the brave new (and highly regulated) world, Opus CMC is providing lenders, servicers and investors with roadmap to quality.