Lenders Express Their Concerns

80 percent of mortgage lenders report being very concerned about loan quality as the August 1, 2015 Truth in Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure Rule, commonly known as TILA-RESPA, deadline nears, and 39 percent plan to spend more on compliance in 2015, according to a recent survey conducted by Capsilon Corporation.  The survey polled more than 100 executives from leading mortgage lenders. Here’s what else the survey found:

The survey revealed that 95 percent of the respondents are either somewhat concerned or very concerned about loan quality, and 80 percent plan to spend somewhat more or significantly more on compliance-related activities in 2015 versus what they spent in 2014.  As a result of the focus on quality, and new regulatory requirements, the results of the survey also show that 80 percent of the respondents reported that their 2014 loan production costs are somewhat higher or significantly higher than their loan production costs in 2013.

This data is consistent with recent Mortgage Bankers Association data that reports total loan production expenses increased to $6,932 per loan in the second quarter of 2014 versus $5,818 per loan in the same period a year earlier, an increase of 19 percent.

“Clearly, this survey data confirms that lenders are struggling with increasing costs as they contend with a myriad of new regulations that require a heightened focus on data integrity and loan quality,” said Sanjeev Malaney, CEO of Capsilon Corporation. “Rather than relying on expensive labor to ensure data integrity, to stay competitive lenders must move to a data-centric model where technology automates much of the processs. Technology gives lenders the ability to move to a straight-through loan processing model, where much of the workflow is automated, with only a small percentage of loans requiring human intervention.”

Although four out of five respondents reported that their organizations are very concerned with loan quality, there isn’t a consensus about how the Quality Control function is handled. 49 percent of respondents said that their Quality Control function is handled in house, while 15 percent said the function is outsourced, with 36 percent stating that they use a combination of in-house and outsourced resources.

In addition, 84 percent of the respondents said that their companies have already begun preparations to meet the requirements of TILA-RESPA, which goes into affect on August 1, 2015. Surprisingly, seven percent of the respondents reported that their companies had not yet begun preparations for TILA-RESPA, and nine percent did not know whether their organizations had begun preparations.

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