L EGAL
Perpetual Burn
ENFORCEMENT MAY BE BACK, BUT COMPLIANCE NEVER LEFT
W THE MORTGAGE COUNSELORS Mitchel H. Kider is the chairman and managing partner and Michael Kieval is a partner with Weiner Brodsky Kider PC.
22 MORTGAGE BANKER | MARCH 2021
ith the change in presidential administrations, some in our industry are asking whether compliance is “back.” In fact, while enforcement may be back in the sense that we expect it to increase soon, the need for strong compliance never left. To understand why this is so, consider how enforcement and other liability tends to happen. After the last financial crisis, the political climate at the state and federal level, along with private suits that tried to shift the costs of the crisis, led to a significant increase in perceived compliance risk. But the alleged compliance violations that were the subject of enforcement and litigation starting around 2009-2011 included lots of conduct that had occurred years earlier. In other words, the compliance risk was already largely baked in. The same is true now. It is, in a sense, too late to avoid compliance failures and regulatory violations that may already have occurred, and which will now be subject to a more aggressive enforcement approach. That is why it is so important for companies to take compliance very seriously even at times when the perceived enforcement risk may be lower. The risk of compliance failures does not
go away. Even when a presidential administration or federal regulator may be taking a less aggressive approach to enforcement, it is all but certain that the pendulum will swing back when there is a change in power at some point in the future. We do anticipate a significant increase in enforcement at the federal level, after the usual lull that comes with a change in administrations, especially an increased focus on fair lending issues. And we expect that enforcement will seek higher penalties and more consumer redress than has been the case recently. The good news for companies in our industry is two-fold: first, most of you have been doing a much better job of compliance for the last four years than companies were doing before Dodd-Frank and the CFPB changed the regulatory landscape. Second, it is never too late to refocus on and improve your compliance. Improvements you make now, before the regulators come knocking, can make a big difference in how regulators respond to any shortcomings you may have had in the past. Companies who think compliance never left are well-prepared for what is to come. But if you perceive that compliance is “back,” be sure to bring it back at your company as quickly as possible.
