At the recent MBA Technology Conference a number of sessions were devoted specifically to TILA/RESPA and the looming deadline of August 1st. Rumors were rampant that the deadline would be extended, despite the fact that the CFPB stated unequivocally that the deadline would not change. We know what happened there. Now the industry has until October to be ready. However, at the MBA Technology Conference there seemed to be more questions and confusion than answers and solutions. The realization that we are now 90 days from the August 1st deadline almost seemed like a surprise to some.
American Land Title Association (ALTA) CEO Michelle Korsmo said recently, “Unfortunately, we’re already aware of one major problem with the new CFPB forms. The Bureau’s Closing Disclosure, which replaces the current HUD-1 Settlement Statement, inaccurately discloses the fees associated with title insurance premiums for consumers.” She went on to state that the new forms are misleading for consumers and could create confusion. While she did not address the reality of consumer confusion with the current HUD-1 form that the Closing Disclosure will replace, I can personally attest to the fact that consumers do, in fact, find it confusing. ALTA asked the CFPB to announce a “five-month restrained enforcement period” on the new forms to give businesses time to adjust to the new regulations. Is this the first time this issue has been brought to the CFPB and the industry’s attention?
The primary objective of the CFPB’s TILA-RESPA Integrated Mortgage Disclosure Rule was to ensure the consumer was not confused and had the opportunity to review and compare loan information from application to closing. I am not privy to all the interactions between the CFPB and the industry, but I will say they have been very open and responsive to Compliance Systems’s requests for clarification and interpretation over the last year and a half. It made me wonder where everyone has been for the last 18 months.
If there ever was a time for the mortgage industry to consider change, it was when the CFPB first announced the Loan Estimate and Closing Disclosures and the focus of those forms on consumer interaction. Some organizations have taken this opportunity to develop and incorporate new workflows, while others tend to automate with little, if any, attempt at process efficiencies or new ways to look at the process.
In the technology world, paving cow paths means automating a business process as is, without thinking too much about whether or not that process is effective or efficient. We tend to automate how we do business today and incorporate little, if any, process efficiencies.
Paving the Cow Path Where did this phrase originate? As the apocryphal story goes, the original winding streets in the city of Boston were built on the paths worn by cattle. Rather than lay out the type of gridded street plan that most urban dwellers are familiar with today, those city fathers supposedly elected to pave the meandering paths that the animals had already established. Those routes may have suited the cows perfectly, but were not designed for efficient human travel. The cattle’s “path of least resistance,” for better or worse, was already there, and an ineffective existing solution is easier to implement than an effective new solution that requires analysis, planning, and more development time. The admonition not to “pave the cow path” is intended to remind us of the hazards of standardizing makeshift solutions that were not intended to address the problem at hand. Like so much good advice—eating your vegetables, exercising daily—paving the proper solution path is easier said than done. Poor solutions are still solutions, after all, and change requires both force of will and a willingness to engage resources in processes that often do not yield immediate results. Jonathan Byrnes, Senior Lecturer at MIT, describes change management is one of the most difficult problems facing managers at all levels. All too often, managers focus primarily on defining the best end-state and deal with the change process almost as an afterthought. As the old change management saying goes:
Old Organization + New Technology = Expensive Old Organization
Embracing change can be intimidating, either in your personal or your professional life. As a person or business gets older, they can sometimes become more risk adverse—not willing to make changes. I like to say that not taking a risk is, in itself, a risk.
Why are we so resistant to change, and what is wrong with how we do business today? If I had to identify only one problem with our collective business practices, I would point to the invisible problem that is so often the root of other, more obvious troubles: we don’t have time to look at improving the process. One of my favorite sayings is, “we don’t have time to do it right, but we always have time to do it over.” Don’t look at how we do business today but instead look at how we want to do business tomorrow. Think about the current problems and business trends and design a system for the future—don’t just pave the cow path.
In a recent issue of Fast Company, editor-in-chief Robert Safian related that the most fully evolved portrait of the essential messiness of innovation was Disney World’s MyMagic+. This five-year digital upgrade cost close to $1 billion and involved completely refitting the 25,000 acre central Florida facility. As Safian states, this included “intense infighting and not a small amount of denial on the parts of top executives about the project’s limitations, fallout, and inefficiency. But for all that disarray, the project also succeeded in reversing declining customer satisfaction, helping propel Disney Parks to a 20% profit gains in its most recent quarter.” Safian points out that Disney would likely spin the story to emphasize collaboration rather the infighting, but that would be glossing over the messiness that is necessary for real innovation.
Safian goes on to say, “Meaningful change is never easy. Most often, it only comes after tortured conflicts and excruciating decisions. Only when we embrace the idea that messiness is to be accepted, even cheered, will we be ready to tackle our own impossible tasks… Things rarely go as planned, and that’s just the way it is. Rolling with the changes will often take you to a better place that you could have predicted.”
The well-known inventor and entrepreneur Ray Kurzweil notes, “About thirty years ago, I realized that timing was the key to success.” Many inventions and predictions tend to fail because timing is wrong. Kurzweil has found that the challenge isn’t just inventing something new, but doing so at just the right moment that both technology and the marketplace are ready to support it.
In the mortgage industry, the technology is available to support innovative process change and the marketplace, both consumers and regulators, are demanding it. Your TILA-RESPA solution doesn’t have to follow the cow path.
About The Author
Roger Gudobba is passionate about the importance of quality data and its role in improving the mortgage process. He is an industry thought leader and chief executive officer at PROGRESS in Lending Association. Roger has over 30 years of mortgage experience and an active participant in the Mortgage Industry Standards Maintenance Organization (MISMO) for 17 years. He was a Mortgage Banking Technology All-Star in 2005. He was the recipient of Mortgage Technology Magazine’s Steve Fraser Visionary Award in 2004 and the Lasting Impact Award in 2008. Roger can be reached at firstname.lastname@example.org.