A recent article in Origination News cited that mortgage lending compliance costs are up almost 30% year over year (Origination News). That should not come as a surprise to anyone in view of the new requirements for QM loans and ATR under Dodd-Frank, coupled with increased scrutiny of loan quality by Fannie, Freddie and the rest of the secondary market.
However that’s only one side of the story. The bigger question is, are lenders getting the best bang for the buck? Are they seeing a return on their investment in compliance and quality from better loans, quicker closings, fewer defects, faster fundings and happier customers? If not, something is wrong. If you’re spending money for the sole purpose of just meeting new regulatory requirements and secondary market needs, and not realizing some return on that investment, you should take a long hard look at your compliance process and system to find out why?
Any system and/or process implemented to ensure compliance and increase quality should result in better loans, processed more quickly and accurately, leading to smoother closing with less errors. These will translate into increased profit per loan. So, don’t just look at the cost of your compliance but look at what is the net result of this investment. When done correctly, with the proper monitoring systems you’ll find the results far outweigh the costs.
Stay compliant my friends.