The Importance of a Robust CMS Structure

BY FELECIA BOWERS, HOMEOWNERS FINANCIAL GROUP

FOCUS. Miriam-Webster defines focus as “to concentrate attention or effort, i.e. focus on the most pressing needs.” The problem with focusing on that definition is that, as a compliance professional, our focus shifts daily or hourly depending on the latest announcement in our email bucket. Internal emails shift us to focus on an internal issue that may impact a loan transaction from moving forward, a compliance hiccup that exposes our company to enforcement fines, a loan sale that cannot be consummated, or a repurchase request due to a compliance problem. Where to focus is going to be a personal decision. What is a priority for one may not be for someone else. So, let me throw out a few items that that may require you to shift your focus.

Advertising enforcement actions were announced by the CFPB against eight mortgage lenders and brokers in the past few months over direct mail campaigns marketing VA-guaranteed loan products. What part of the “Truth in Lending Act” did these organizations not understand? I must ask the same question about the Unfair Deceptive Abusive Acts and Practices, highlighting the word “deceptive.” APRs were not accurate, the campaigns advertised loans as fixed rate when in fact they were adjustable rate, and implied they were affiliated with the VA, etc.

These recent enforcement actions by the CFPB stand to highlight the importance of a robust CMS program covering all things advertising. Should this be your focus of finetuning your CMS program? Remember, you should have a CMS program that is consistent with the size, complexity, and risk profile of your company. YET, every company out there bases their advertising platform on how different they are than the rest of the pack. Great…no pressure here to get it right!

Or should your focus be on a deep dive into your advertising program? Have you searched the web, Facebook, Twitter, and YouTube for your loan officer’s names lately? We subscribe to a service that does this for us, but some companies cannot afford a vendor. “The budget” or “no time” are not valid reasons with examination teams when they ask how you monitor your MLO populations advertising. You desperately need to make that time to review federal and state advertising requirements vs. social media.

Regarding the states, they are checking their respective Secretary of State websites for other employment with which your loan officer staff may be involved. They are looking for violations of other activities the MLO did not list on the NMLS. There is a question on their profile page asking if they are engaged in other businesses. If they answer yes, they must disclose certain information. Is your company employing the NMLS to review this question at the time of hire or as part of your prescreening efforts? And, if you learn of a side gig the MLO is engaged, are you making sure their NMLS profile is current?

And speaking of time, November is the renewal period for every mortgage banker, broker, and loan originator in the country via the NMLS. Do not wait until the last minute to push out your company renewals as competition is fierce. Compounding the last-minute push is the fact that state agencies are strapped due to their own budgets and some still have remote deployment of their workforce.

Did I say renewals? Do not forget your HUD renewal. If you had a company event such as an ownership change or have a pending lawsuit, you may need to get HUD’s approval to re-certify for their renewal. If you have not disclosed said event or suit, you should take a few moments to read the criteria for disclosing and take care of the task immediately. It can take them three to six weeks to respond and clear the path to renewal.

On the subject of paths, we have a clear path in front of us rolling out the new URLA. Take a moment to review your game plan so you are ready for the March 1, 2021 implementation date. By now your company should have decided if you are going to provide all borrowers with all pages, the primary borrower with all pages and the co-borrower with just their page, no one will receive the lender page, or some other hybrid delivery. Be sure to monitor the transition period for loans in the pipeline, especially builder loans which hang around for several month between origination and closing.

How apropos to end the previous paragraph on closing because if you missed the webinar by MISMO introducing the Uniform Closing Instruction Templates, you missed a lot. Uniform closing instructions have been bantered around for many, many years. I remember working on this project back in the 90s, so I am crossing my fingers this one completes the development and introduction cycle. A uniform set of closing instructions has been something the closing industry has requested for 20+ years. MISMO has changed the focus from common language, the sticking point, to creating a standardized template to a focus based on format. I’m fairly confident we do not have “common language” in this industry. The focus on format will allow settlement agents to streamline where they need to look and at what to look.

Sliding into something to look at, the FTC has requested comments on five different proposals relative to the Fair Credit Reporting Act which they hope to bring in alignment with the Dodd-Frank Act. Notices of Public Rulemaking are requested on (a) address discrepancy rules; (b) affiliate marketing; (c) furnishers of information; (d) prescreen opt-out notices; and, (e) risk-based pricing.

Risk-based pricing comments and compliance is the perfect transition to remind everyone to review HUD’s finalization of disparate impact regulations under the Fair Housing Act. The guidance seems to shift the burden of proof relative to a discrimination claim to the Plaintiff. Be sure to get your HMDA data analyzed for fair lending issues, and review your overall company for fair lending and discrimination.

Transitioning into discrimination, per the CFPB’s announcement on August 19, 2020, the Consumer Financial Protection Bureau (Bureau) announced that it will provide an additional 60 days for public comment on its Request for Information (RFI) on how best to create a regulatory environment that expands access to credit and ensures that all consumers and communities are protected from discrimination in all aspects of a credit transaction. The extension for submission of comments provides interested parties with more time to conduct outreach to relevant constituencies and to address the many issues raised in the RFI. The original deadline for submissions was October 2, 2020. The comment period will now close on December 1, 2020.

Remember that the Equal Credit Opportunity Act (ECOA) and Regulation B make it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction on the basis of race, color, religion, national origin, sex or marital status, or age; because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act.

The information provided will help the Bureau continue to explore ways to address regulatory compliance challenges while fulfilling the Bureau's core mission to prevent unlawful discrimination and foster innovation. To read the RFI click here: https://files. consumerfinance.gov/f/documents/cfpb_rfi_ equal-credit-opportunity-act-regulation-b_ comment-period-extension.pdf.

On the topic of the CFPB, they have certainly been busy. They have published a new reference tool for 2021 HMDA Data to be collected in 2021 and reported in 2022. They issued new MSA Guidance replacing the former RESPA Section 8 FAQs. On October 5th, they issued a policy statement on relative applications for early termination of Consent Orders. Also, in October, they released a TRID Assessment that is worthy of your reading time budget.

And relevant to budgets, now is the time to get in front of your executive team relative to your compliance budget for 2021. The pandemic did not suppress loan production, and, in fact, pipelines were swollen to the brim re-introducing the concept of a stay-cation. Families purchased RVs and put in pools and backyard oases for friends and family to visit and to keep the kids occupied while we worked from home, lounging by the pool. The budget. Now is the time to ask for assistance (internal or external) in the compliance department. Quote the tidbits cited above plus a plethora of postponed internal risk assessments; dedicated attention to MLO and company advertising activities; MSA Reviews and documentation; new and revised rules; new forms; scrutiny of HMDA data for fair lending; increased exams (I’m working on seven right now); and, compliance train is never ending. I learned years ago that if I continue to hoard my responsibilities or work 70+ hours per week, no one at the top will see that there is a staffing or vendor assistance needed in compliance. The work is getting done but at what cost? Ramping up production staff and operations staff is great, but if the compliance support to mitigate enforcement fines, compliance failures on loans destined for sale, and the entire CMS infrastructure is not in place, the rest will fall apart. MBM