In the winter issue of California Mortgage Finance News, Liza Warner and Monika McCarthy address the considerations lenders face when reviewing the options for partnering with fintechs. Finding the right fintech solution partner and implementing compliance protocols and best practices to mitigate risks is a win-win for consumers, lenders, technology innovators, investors, and the industry as a whole.
Mergers and acquisitions (“M&As”) continue to increase, and compliance personnel play an important role in the process. In the November-December 2018 issue of ABA Bank Compliance, Heidi Wier’s article “Two Days to Perform M&A Due Diligence: What Should Compliance Focus On?” outlines essential compliance considerations for M&As. A strong roadmap that covers as many high-risk areas as possible is imperative to protect your institution from overpaying, costly regulatory delays, or even fines and penalties after the fact.
In the September/October issue of Western Banker, Heidi Wier and Karen Cullen discuss the challenges of operationalizing and controlling UDAAP risk in banking in their article “Operationalizing UDAAP: Building a Strong Foundation to Control Risk”. The complexity arises from a lack of implementing regulations and UDAAP’s broad applicability across various customer experiences, including products, pricing, and marketing. To establish a strong UDAAP foundation, banks should implement clear policies, provide training, foster a customer-centric culture, manage complaints effectively, oversee third-party vendors, and ensure robust monitoring and board oversight. A comprehensive approach to UDAAP compliance will help mitigate risks and ensure fair treatment of consumers.
In the August 2018 issue of ComplianceAction, Mollie Sudhoff discusses “Appraisal Considerations of the EGRRCPA,” highlighting implications of the Economic Growth, Regulatory Relief, and Consumer Protection Act, or “S2155.” This law seeks to relieve certain Dodd-Frank Act provisions while introducing new compliance requirements. Sudhoff stresses the importance of understanding the new appraisal guidelines, including exemptions for rural properties and donated services. While the EGRRCPA aims to ease compliance burdens, accurate appraisals remain essential for sound economic decisions.
In the August 2018 issue of Mortgage Compliance Magazine, Tim McWay and Todd Krell’s article “Mitigating Fraud Risk Through the Loan Life Cycle,” highlights the need for a comprehensive fraud prevention program. With mortgage fraud on the rise, as indicated by increasing reports from CoreLogic and Fannie Mae, the authors identify contributing factors such as a stable economy and a shift from refinancing to higher-risk purchase transactions. They emphasize the importance of fostering a culture of fraud prevention that starts at the application stage and extends through processing and closing.
The July 2018 article “Leveraging Technology to Improve the Accuracy of HMDA Data” by Heidi Wier in Housing Wire addresses the challenges financial institutions face in ensuring accurate Home Mortgage Disclosure Act (HMDA) data. Wier highlights the importance of systemic data integrity reviews, suggesting that technology can enhance accuracy and reduce costly manual file reviews. As regulators increase scrutiny, particularly for 2018 HMDA data, she outlines a multi-step integrity process that includes omissions testing and conflict/error testing. While systemic reviews are not infallible, they allow lenders to efficiently analyze their entire Loan Application Register (LAR), proactively managing risk and maintaining data accuracy to meet regulatory expectations and improve fair lending practices.
The special supplement to Illinois Banker, 2018 Banking Trends: Management and Operations, includes the article “Are You Leaving Money on the Table? – Using Regulation E More Effectively can Reduce Operating Losses,” in which Kelli Schoon-Saxsma and Heidi Wier highlight the potential risks financial institutions face when neglecting Regulation E in the wake of evolving regulations. With the rise of electronic payments, inadequate focus on claims processing can lead to operational losses and compliance challenges. By implementing robust procedures and staff training, banks can not only mitigate errors but also enhance customer service and safeguard the integrity of their HMDA data.
In the Summer 2018 issue of California Mortgage Finance News, Monika McCarthy’s article “State Attorneys General Ramping Up – Are You Ready?” discusses the increased supervision and enforcement by state regulators following a decline in CFPB activity under the Trump Administration. She highlights the significant power of State Attorneys General (AGs) as both legal advisors and law enforcement leaders. With 27 Republican AGs and 22 Democratic AGs, the political landscape can impact regulatory focus. McCarthy emphasizes the importance for lenders to engage with regulators, adapt compliance strategies, and prepare for potential state-level enforcement, particularly regarding consumer protection and fair lending practices.
Karen Cullen’s article in the June 2019 issue of Mortgage Compliance Magazine “Controlling the Narrative – Now is the Time to Understand Your Data” highlights the necessity for financial institutions to understand their Home Mortgage Disclosure Act (HMDA) data in the evolving mortgage landscape. The article encourages evaluating lending demographics, marketing effectiveness, and loan processing times to uncover growth opportunities. Cullen advocates for proactive risk management to mitigate risks while enhancing business development, urging institutions to assess disparities in lending practices and benchmark performance against peers to improve community service and regulatory compliance.
In her “Staffing Up for CMS” article from the March/April 2018 issue of ABA Bank Compliance (now ABA Risk and Compliance), Liza Warner highlights the necessity for financial institutions to evolve their compliance teams to strengthen their Compliance Management System (CMS). Warner outlines the “three lines of defense” model—business lines, risk and compliance, and internal audit—emphasizing the importance of clear roles. She also stresses the need for ongoing training, management support, and a collaborative culture to enhance compliance effectiveness and build trust with customers and regulators.
‘In the February 2018 issue of Mortgage Compliance Magazine, Bill Tyner and Jim Shankle highlight the importance of internal Quality Assurance (QA) and Quality Control (QC) systems in loan servicing in their article “Avoiding Surprises – Servicing Quality Assurance and Quality Control Monitoring Systems can be Management’s Best Friend.” As servicers navigate heightened regulatory scrutiny and competitive pressures, these systems not only ensure compliance with regulatory requirements but also enhance operational efficiency. By distinguishing between QA’s preventive focus and QC’s detective function, the authors advocate for a robust internal control framework that proactively identifies potential issues before they escalate, safeguarding both operational integrity and organizational reputation.
‘Jim Shankle and Liza Warner’s article, “The Mortgage Servicing Rule – Are You Prepared?”, published in the September/October 2017 issue of ABA Bank Compliance (now ABA Risk and Compliance), addresses the implementation challenges of the 2016 Mortgage Servicing Rule. The authors highlight the critical need for servicers to adapt to new requirements, particularly regarding servicing transfers and the management of delinquent loans. They stress the importance of strong organizational strategies, effective training, and quality assurance processes to ensure compliance and protect borrowers from potential harm.
‘In “The Ongoing Challenges of Servicing Transfers,” published in Mortgage Banking Magazine in February 2016, Chris Ortigara and Jim Shankle discuss the critical need for loan servicers to meticulously review their loan-boarding processes to ensure compliance with the CFPB’s mortgage servicing rules. They note that while many servicers are familiar with loss mitigation rules, challenges persist in documenting and implementing all aspects of their policies. Drawing on the CFPB’s Supervisory Highlights, the authors stress the importance of actively reviewing these updates to address common industry shortcomings.
In “Preparing for the Unexpected – Getting in Front of Major Risks Through an Enterprise Risk Management Framework,” published in the December 2017/January 2018 issue of HousingWire, Jim Jorgensen highlights the importance of a robust enterprise risk management (ERM) framework for lenders. Drawing on Susan Schmidt Bies’s insights, he emphasizes that effective risk management can help avoid pitfalls like those seen during the Great Recession. Jorgensen advocates for the COSO framework, which aligns risk management with organizational strategies and encourages open communication about risks.
In “Distinguishing Between a Real Internal Audit and an ‘Imitation’,” Chris Ortigara outlines essential considerations for independent mortgage companies seeking external support for their internal audit functions. She emphasizes the importance of starting conversations with certified professionals, as a solid understanding of internal audit concepts is critical. Ortigara clarifies that the International Institute of Internal Auditors (IIA) sets the standards, not regulators or investors. The article explores the “three lines of defense” model, where internal audit serves as the independent third line assessing risks across functions.
In their article “Effective Partnerships Between Banks and Marketplace Lenders – Managing Third-Party Risk,” published in the November/December 2016 issue of Illinois Banker, Chris Ortigara and Jim Shankle explore the evolving landscape of marketplace lending. They highlight how banks are shifting from viewing fintechs as potential disruptors to recognizing the value of collaboration. The authors emphasize the importance of three critical components in managing third-party risk: the fintech’s Compliance Management System (CMS), vendor management processes, and the testing of proprietary platforms. By ensuring strong oversight of these areas, banks can mitigate regulatory risks and foster successful partnerships with fintech companies, ultimately enhancing their service offerings in an increasingly competitive market.
Liza Warner’s article “Compliance Management – Working Smarter,” published in the July/August 2016 issue of ABA Bank Compliance (now ABA Risk and Compliance), discusses effective strategies for managing the compliance function in the face of ongoing regulatory changes. Warner emphasizes the importance of a robust Compliance Management System (CMS) that fosters a proactive compliance culture. She outlines key elements such as clear accountability through a three lines of defense approach, the integration of preventive and detective controls, and the need for effective training and vendor risk management.
In his article, “What Is Your Time Worth?” published in Mortgage Compliance Magazine in the June 2017 issue, Todd Krell discusses how you can have a more effective quality assurance program. He emphasizes the importance of evaluating the time savings associated with quality control functions, particularly when outsourcing these services. Krell highlights three key areas where time considerations are crucial: responses to findings, reporting and governance, and monthly reviews of vendors.
In her article, “Unprecedented Times Call for Unprecedented Leadership – Advice for General Counsel from General Counsel,” published in California Mortgage Finance News in the Spring 2017 issue, Monika McCarthy shares the advice of General Counsel colleagues on the challenges impacting the mortgage industry.
In her article “Best Practices for the Consumer Complaint Management Program,” published in the March/April 2017 issue of ABA Bank Compliance (now ABA Risk and Compliance), Liza Warner discusses best practices for managing consumer complaints in banks. Learn more about how banks can more effectively meet their strategic business objectives and manage regulatory risk.
The ABA announced in the September-October 2018 issue that Liza had won the prestigious APEX writing award for this article in the How-to-Writing category. We appreciate the ABA’s submission of this article to APEX.
