Banal, Boring And Predictable

I recently attended the MBA’s Regulatory Compliance Conference and I’m not sure why. I know why I signed up in the first place. I wanted to learn how others were handling the implementation of all these new regulations, identify where the operational problems are with small and large lenders as well as figure the best approach for ensuring overall operational compliance while keeping costs under control. Unfortunately, it just didn’t happen.

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I guess I should have known better. While the names of the sessions teased the probable attendee with terms that indicated operational issues would be addressed, the reality was that attorneys and senior compliance staff spent most of the time telling the audience about the “law” associated with the regulations and believe you me, if you are not an attorney, this is enough to put you to sleep. Questions from the participants, even when they were about operations, were answered in very simplistic and ineffective terms. I repeatedly heard that lenders should have policies and procedures in place. Duh! Who doesn’t know that but someone should have been able to provide more detail about how that is done. There were also numerous mentions of the “CMS” required by the CFPB.   Hopefully if you were in the audience this acronym meant something to you. However, I never heard anyone discussing all the facets of such a program. For those of you who don’t know, “CMS” stand for Compliance Management System and is intended to require that all facets of the operations, not just regulatory compliance, are managed, monitored and improved in a systemic approach that ensures the reliability of the organization to produce and/or service mortgage loans.

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So what sould have been included instead? With all the expensive technology and regulatory technology resources available, lenders do not necessarily have to have an in-depth knowledge of each regulation. Regulatory compliance personnel should be focused on understanding their operational methodology and be able to discern what creates risk, in this case regulatory risk. From that perspective the conference should have provide direction on how to develop an implementation approach that is viable for the organization, including identifying the areas of weakness that may give rise to potential risk from the regulators. There should have been discussion, direction and recommendations on how to provide training for the staff on each new or changing procedure associated with the regulations. There should have been a comprehensive discussion on how the organization can monitor the effectiveness and reliability of the procedures meeting the regulatory expectations and most importantly, how to institute an effective management reporting and improvement process. None of this was provided.

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Another area that was never discussed was the costs associated with complying ith the regulations. Today many lenders spend way too much money on reviewing loan files in the hope of finding that one or two files that are non-compliant. This is a waste of time and money. Lenders, as part of a solid CMS should have developed a risk tolerance for process variation based on the reliability of the process to perform. Yet none of this was included was part of the discussion and no ideas or support was provided.

It is time for the MBA to step up, to stop presenting often repeated banter as meaningful and provide some strong support. If they choose to continue as they have been then the costs associated with attending these conference is wasted.

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