Magazine article Mortgage Banking

Will 2016 Be the Year Our Industry Drives, Rather Than Reacts to, Change?

Magazine article Mortgage Banking

Will 2016 Be the Year Our Industry Drives, Rather Than Reacts to, Change?

Article excerpt

ACCORDING TO THE CALENDAR, the Mortgage Bankers Association (MBA) Annual Convention occurs near the end of the year. To me--and maybe it's a throwback to my school days, when the new year seemed to start in the fall-- it's also the unofficial start of the year to come. And this coming year, the out-look and the attitude of the industry are decidedly more positive than they have been for quite a while.

The U.S. economy is clearly doing better: Employment and confidence are up; housing prices in most parts of the country are back (or nearly back) to their 2007 peaks; and defaults and foreclosures are continuing to trend down.

Also, Oct. 3 has come and gone, and the Truth in Lending Act (TILA)-Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure rule (TRID), like Y2K, turned out to be a scary, expensive and disruptive event--but not cataclysmic. (At least I hope not, as this column is being written in early September.)

Most importantly, with more certainty and understanding on TRID, I believe that our industry may finally be on the downhill slope of outside, regulatory-imposed change and beginning a new era of industry-generated change. Whether this starts in three months or a year from now, I believe that it could usher in an expansive, new phase for our industry in which we again control our own destiny--a new era in which technology and creativity again shape our future.

Getting accustomed to good news and new rules

In recent months, we have seen a steady stream of good news for the housing and mortgage industries. Forecasts for 2015 and 2016 originations have been increased several times (although a drop-off is still expected for next year). A new analysis of the 2014 Home Mortgage Disclosure Act (HMDA) data even showed that last year wasn't quite as bad as we all thought; in fact, 2014 originations were roughly $1.3 trillion, which was significantly better than what was forecast.

Housing-price appreciation, along with job and income growth, are all driving down defaults. This, in turn, has created stability within the servicing sector and given overstressed servicers an opportunity to not only catch their breath, but also catch up with the plethora of new rules and standards set by the National Mortgage Settlement, the Consumer Financial Protection Bureau (CFPB), the government-sponsored enterprises (GSEs) and the states.

Compliance, on both the servicing and origination fronts, has been the overarching concern for lenders and their vendor partners for the past seven years.

While no one is suggesting that compliance is going away anytime soon, I'd argue that at least we, as an industry, are finally used to the new rules. Qualified Mortgages (QMs) are now the norm, and an increasing number of lenders and investors are getting comfortable with non-QM products and are even beginning to explore securitizing them.

TRID required lenders and vendors to significantly revamp their technology and workflows, and has added a great deal of angst and cost. Earlier this year, lenders interviewed for STRATMOR Group's TILA-RESPA Readiness Survey said they expected TRID compliance to add about $160 to the cost of every loan.

Ready or not, however, TRID is here. Some lenders and settlement services companies are probably dealing with it manually--throwing bodies at the problem and "staring and comparing" to catch discrepancies between loan estimates and closing documents. However, most are relying on systems and technology to support their compliance framework and reduce risk.

The TRID experience, I believe, will accelerate our industry's adoption of compliance automation. Also, it seems to be one of the last big pieces of the government's plan to redesign the mortgage process. …

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