Top 6 Themes from MBA Legal Issues and Regulatory Compliance

By: Jeff Flory, Chief Executive Officer

We had the opportunity to connect with many attendees and sit in on several sessions at the Mortgage Bankers Association’s Legal Issues and Regulatory Compliance Conference earlier this month in San Diego and left inspired by the overall sentiment. Despite interest rates continuing to trend upward, the industry seems optimistic as volumes rise with the homebuying season in full swing. In a market where the challenges mortgage companies face are real, there was a rational acceptance that we are normalizing to the new environment and getting on with business — headwinds and uncertainty notwithstanding.

Here are the top 6 key themes we heard while at the show:

• Loan Officer Compensation. There were several sessions that directly or tangentially addressed Loan Officer Compensation and the NAR settlement and its potential impact on the homebuying process. There was discussion around how the NAR settlement and the elimination of buyer cooperation could have an adverse impact on low-to-moderate income or first time homebuyers who may have difficulty in securing adequate representation for a complex and life changing transaction. 

• Insurance Concerns. Julie Svetlana Juarez, the Deputy Commissioner of the California Department of Insurance, shared the challenges California faces in addressing accelerating issues in insurance availability. The top 12 insurance companies in the state hold 85% of the insurance policies, and several of those companies have either paused writing new policies, limited the amount of policies they’ll write, or are restricting their underwriting to low-risk areas only. Because of statutory limits on rates that are set by companies in California, insurance companies suffer direct underwriting losses of 13.1% on every policy. Juarez identified several ways the state is trying to build a sustainable insurance strategy, and while some of the challenges are unique, some of the underlying issues are seen across the country, including inflationary pressure in terms of supplies, materials and adequate skilled labor, and the reinsurance market is getting costlier as well.

• CFPB Update. The CFPB has signaled it will be paying more attention to the recent rise in discount points. Bob Broeksmit, CEO of the Mortgage Bankers Association, offered a logical retort the MBA’s National Advocacy Conference, explaining that discount points weren’t as widely used when interest rates were lower and that in a rising rate environment, discount points would be leveraged more heavily by borrowers to lower their interest rates. Rohit Chopra from the CFPB took the stage in NYC at the MBA Secondary Conference last week to rally against high fees for required services where the service provider has a monopoly or near monopoly on the product’s use. This is all being looked at through the lens of UDAAP and whether or not the consumer is being deceived or being taken advantage of.

• Artificial Intelligence. With the increased usage of AI, there is a need to understand the impact of these new technological advancements. Lenders have a responsibility to provide consumers with an experience that does not go against existing federal laws around non-discrimination, fair competition, and consumer protection.  In addition, while the use of AI can potentially help create a more efficient consumer experience, the concept has to match reality, and the CFPB is focused on AI’s benefits and pitfalls. In addition, the federal government has been actively addressing false AI claims and the degree to which it’s leveraged as a means to attract new consumers.

• Mortgage Fraud. In the “Trends in Mortgage Fraud” session, they discussed how motivations for typical frauds in our market are driven largely by a borrower’s need to qualify for, or save money on, their mortgage. Because of this, they suggested lenders should:
  • Benchmark their organization’s data against others
  • Review their controls at least annually to ensure they are still effective and address gaps
  • Refresh training materials to ensure new employees understand red flags and how to report suspicious activity
  • Pay close attention to FNMA and FHLMC alerts regarding new trends, fictitious employers, and case studies

• Data Security. With the recent history of very public data breach announcements from several significant mortgage players, data breaches and data security issues were discussed in a couple of sessions. The importance of having sound internal practices for data security were amplified in terms of not only third-party data security, but extending even to the service providers leveraged by third parties.

Overall, the conference was jam-packed full of meaningful discussions on a variety of hot topics – many of which will be continued discussions as the year unfolds. For more information on our involvement with the industry or how we can help you redefine quality at your organization, contact us today: