The Regulatory Risks Ahead


Get ready, because 2017 will bring a lot of new regulatory challenges. You can be sure that regulatory risk continues to weigh heavily on lenders’ minds. So, are there any specific regulatory rules coming up in 2017 that lenders should be preparing for? How about enforcement action? What hot button items do lenders need to stay away from next year?

You bet, answers Wade Hamby, national director of sales and marketing, Stonehill Group. “The new 1003 and HMDA change is going to be big next year. Servicing remains in the spotlight and will continue to be. With respect to TRID, in the fulfillment area we are seeing that it takes more time to clear stips.”

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Hamby has more than 25 years of executive experience in mortgage lending, outsourcing and quality control. He oversees The StoneHill Group’s nationwide sales and marketing activities and is responsible for expanding use of the company’s solutions in the mortgage industry.

“Further, the new 1003 will impact how you capture data,” he continued. “Lenders have to have partners that are effective when it comes to cyber security. You have to do the penetration testing and meet those compliance needs. Too many vendors don’t provide those services. There’s a lot to prepare for.”

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So, how do lenders get prepared? Many are turning to technology. One can argue that technology plays a far more significant role in today’s enforcement driven market. With so many regulatory landmines, lenders use technology to stay out of trouble, protect profitability and be as efficient as possible. That being said, how have lenders’ technology strategies evolved in the year or two? Why? In your opinion, what are the elements of an effective technology strategy in today’s market? And what is the single biggest mistake lenders make regarding technology?

“Technology is critical,” pointed out Brian Fitzpatrick, president and CEO of LoanLogics, Inc. “We are missing the boat to what technology should be doing to drive down cost, though. Technology has to embed all the rules. Technology has to take all of those rules and guidelines and embed them within the system and deploy as close to the point-of-sale as possible. Technology has to be dynamic so it can be easily changed as the rules change.”

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Fitzpatrick oversees all operations of LoanLogics. Mr. Fitzpatrick has raised industry-wide awareness of how technology plays a key role in the production and measurement of loan quality and performance.

The regulatory landmines ahead are many. “There are a number of new obstacles things coming up,” added Fitzpatrick. “For example, the required use of trended credit data will be mandated. Comments are due to the CFPB for updates to TRID. The changes will be impactful. There will be new HMDA fields that need to be captured. In 2017 we’ll see the optional use of the new 1003, which will be mandatory in 2018. All of this speaks to the need for more dynamic technology.”

“In addition, we are expecting UCD in the second half of 2017,” added Kelli Yarbrough, vice president of Loan Retention, Roundpoint Mortgage Servicing Corporation. “We are expecting a lot of guidance. In general, lenders need to resist the urge to rush into things like non-QM. You need to be well trained and have your technology in place before you wade in.”

Yarbrough is responsible for all aspects of customer contact in the loan retention process for RoundPoint’s MSR portfolio. Ms. Yarbrough is a veteran of the mortgage industry with more than 16 years of experience leading both sales and operations teams in wholesale, retail, and direct-to-consumer channels.

“As much as lenders rely on technology, often times we are catching things too late,” she noted. “A key point to a successful technology strategy is system integration. If the systems aren’t able to speak with each other they won’t last. Everyone needs to remain nimble, but we can’t forget to invest in training programs for the front line. The LOs have to understand how to use the technology and comply with the rules. I think we expect too much from our technology.”

A wild card in all of this could be the outcome of the Presidential Election. “With the election coming up, we should look at larger issues like a lack of new affordable housing,” said Fitzpatrick. “Also, rates are going to go up. So, how does all of that impact the market? The news coverage needs to focus on these issues relative to our industry, as well.”

Regardless of what happens, the smart lender has their eye on the future. “Next year will be the year that we crack open all the data,” said Brian Koss, EVP of Mortgage Network. “If you are forced to collect new data at the same time you have to deal with a new application, that should be a good thing for the space to digest. It will be a good opportunity for the industry to rethink the entire process.”

Brian Koss has more than 25 years of mortgage banking experience and has personally generated more than $1 billion in home loans. Mr. Koss has trained hundreds of loan officers over this career, including many top producers. For ten years, he served as the host for “Mortgage Mondays” on the nationally syndicated “Money Matters” radio show.

“Lenders are typically founded by sales guys that pay little attention to detail and just buy technology off the shelf,” Koss said. “It’s like self medicating. You have this ache so you take this medicine, then this other thing hurts so you pick up some medicine for that, but you aren’t aware of how those medicines work together. Lenders will some times buy something because it sounds good, but you have to look at how that new technology impacts your process and other technologies. That decision making process has to end.”

All of this change is making it more and expensive to originate a loan. “Everyone is talking about how the front end is changing and being digitized, but the real issue is that we have to figure out how to bring the cost of complying down,” concluded Fitzpatrick. “Lenders will not be effective if they are always scared of compliance enforcement. A lot of the technology on the market today is old technology that has been around for 20 or 30 years. It’s like building a new modern house on top of old knob and tube wiring system. It doesn’t work. Technology has to evolve to help lenders meet the challenges of complying.”

About The Author

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at

Executive Spotlight: Wade Hamby of The StoneHill Group

Wade-HambyThis week, our spotlight considers the state of the industry and our guest is Wade Hamby, the new national director of sales and marketing at The StoneHill Group, based in Atlanta.

Q: You have just been appointed as The StoneHill Group’s national director of sales and marketing. What are your immediate and long-term goals in this new position?

Wade Hamby: The mortgage industry’s biggest challenge right now is meeting a constantly changing set of regulations and requirements. Nobody likes to change, and yet everybody has to. Our mission is to make these changes as easy and painless for our clients as possible. We do that by leveraging our nearly 20 years of expertise delivering quality control and fulfillment services to help companies meet all of their loan review and auditing requirements.

Personally, my goals are to enhance The StoneHill Group customer experience for our current clients and find opportunities for new clients to have the same experience. To achieve these goals, I’ll be building a more robust team to make sure clients and non-clients know about our services and are getting all the help they need in the current regulatory climate. The next step will be to introduce new technology that will greatly improve the auditing process for our clients. The mission there is to provide lenders with flexibility when it comes to QC, so they can reduce their time-in-file costs tremendously.

Q: How do you view the state of today’s mortgage banking industry?

Wade Hamby: It’s an exhilarating time for our industry. It’s a much more open market and there are more opportunities for mortgage lenders than we’ve seen in decades. There are no companies left that truly dominate the market. It’s a very diverse playing field, so as volumes return to more normal levels, I think we have the makings of a very robust recovery.

Will we ever see a large, dominating player like a Wells Fargo, Countrywide or Bank of America again? Given what has happened to the big banks in recent years, I don’t think so—not in my lifetime, at least. I don’t think the market can sustain that type of dominance, and I don’t think many companies want it.

I would also add that, to a large extent, the industry is also much healthier because mortgage bankers are self-governing themselves and improving the origination, processing and servicing processes. Of course, having new rules to comply with have pushed things along. But I’ve seen a large amount of self-awareness and growing desire among mortgage bankers to originate quality loans. Our clients know they need to take a very proactive stance toward compliance. They seek stronger controls and better policies as much as they want more production.

Q: Do you think that mortgage banking companies, on the whole, are doing a good job in marketing themselves? And if not, where they can stand some improvement?

Wade Hamby: Judging from what our clients are doing, I think mortgage bankers are doing a great job at marketing themselves. Where improvement is still needed most is servicing, though. With the meltdown, the rise of the CFPB and the advent of new regulations over the past five years, we’ve seen a lot of progress. But we’re not done yet.

When you look at all the consumer complaints that have come out over the past several years and the failure of some very large companies, it’s evident that the industry still has room to improve. Inefficient processes can be costly for servicers, too. More servicers could benefit from servicing audits that include escrow analyses, collections, investor remittances, tax and insurance payments and more. The StoneHill Group provides these audits and they are a growing part of our business.

Q: Housing issues played a somewhat limited role in the 2012 elections. Do you think they will be given greater priority in the 2016 race?

Wade Hamby: I do see housing taking a more prominent role in the 2016 elections. There’s a deep divide between the executive and legislative branches over the future of the GSEs, which I think we’ll see play out during the next presidential election. But it’s anyone’s guess what will actually happen.

Q: Where do you see the greatest growth potential within the industry – with community banks, credit unions, independent mortgage banks or other entities?

Wade Hamby: All of the above, actually. With the decreasing numbers of large banking and deposit entities and mortgage brokers, we’re already seeing a huge shift of activity toward community banks, independent mortgage bankers and credit unions. I don’t see this trend reversing anytime soon.

When you look at the current landscape, there’s an abundance of credit for mortgage originations that did not exist three or four years ago. We’re seeing large community bankers buying loans from correspondent lenders, and growing independent mortgage bankers now developing relationships with the GSEs – Ginnie, in fact, is becoming very popular in this regard. At the same time, we’ve seen a steady weeding out of marginal mortgage players over the past five years. The entities that are left are in it for the long run. And since our company’s focus is on quality control and compliance, our job is to help these companies not only make it but to thrive.

The StoneHill Group is online at

Phil Hall has been (among other things) a United Nations-based radio journalist, the president of a public relations and marketing agency, a financial magazine editor, the author of six books and a horror movie actor. Also, as you will discover, he is not shy about stating his views.

Market Analysis: Another Noteworthy Partnership

*Another Noteworthy Partnership*
**By Tony Garritano**

***Last week I heard of a partnership between AllRegs and Mortech. Today I heard of a new partnership that I also think is significant. The StoneHill Group, a nationwide provider of quality control audits, fulfillment, due diligence and FHA insuring solutions for mortgage originators, announced a strategic alliance with MRG Document Technologies (MRG), a provider of mortgage document preparation software and mortgage compliance technology and expertise that maximize profits and reduce costs for mortgage bankers. This alliance has, and will continue to, add value to clients of The StoneHill Group through the use of MRG’s CompliancePlus solution.

****“Mortgage companies, Credit Unions and Banks will benefit from this partnership because the management teams share a passion for quality in the services provided,” said David Green, president of The StoneHill Group. “Our management and staff have direct experience in the origination, underwriting, closing, post-closing, sales, and administration of file assets. It’s a win-win across the board for mortgage loan originators. MRG will deliver accurate, compliant document packages and complete the legal reviews required by state law in TX. StoneHill will do the heavy lifting of reviewing the files and delivery to investors and the GSE’s.”

****The StoneHill Group takes every measure to insure compliance, understanding that being SSAE 16 certified is extremely important to banks, credit unions and independent mortgage companies. It is definitely a positive variable cost alternative.

****MRG’s CompliancePlus represents a robust solution to the escalating demands of the regulatory environment ensuring compliance control integrated with the document preparation process. “By incorporating MRG’s CompliancePlus into services offered by The StoneHill Group, the lender benefits from MRG’s compliance coverage and an integrated DEFENSE of the content and compliance calculations,” said Mike Riddle, Managing Partner.

****Regulatory reform is underway led by the efforts of the Consumer Financial Protection Bureau, and the rules for real estate financing are changing. Lenders that use a service provider which is tightly integrated with a nationally recognized compliance provider for their QC, fulfillment and due diligence requirements are provided safeguards against mistakes and borrower or investor recourse. The partnership of The StoneHill Group and MRG Document Technologies brings confidence and competence to the mortgage banking community.