You Deal With It

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 28 of 67

Feature A Fever Pitch The industry is anxiously prepping for changes in federal housing finance laws. But will small companies be able to comply to the mandated degree? By Sandra Lane E veryone involved with the mortgage industry is working overtime to prepare for massive changes to federal housing requirements becoming effective in January as well as anticipated changes after that date. Many wonder if they will be able to keep up with new requirements, which may necessitate more personnel or new technology. Most are concerned about the overall effect on their businesses. Large Will Thrive, Small Will Survive L arger lenders will have an advantage in meeting the new requirements, according to Jack Konyk, executive director of government affairs for Weiner Brodsky Kider P.C., Washington, D.C. "Everyone talks about some entities being too big to fail, but I'm far more worried about those entities who may be too small to comply," he said. Konyk believes that small companies may have a very tough time coping with the changes. "This is the largest change in the way the mortgage business operates since enactment of the National Housing Act and the National Banking Act in the 1930s, following on the heels of the Great Depression," he explained. "These changes are very broad in scope and touch on every aspect of the mortgage business." The changes coming in January affect loan origination activities and underwriting requirements, including determination of a borrower's likely ability to repay, servicing rules, appraisal rules, increased protections for borrowers in higher-cost loans, and homeownership counseling requirements. Additional changes already in the formal proposal stage include consolidation of Truth-In-Lending and Real Estate Settlement Procedures Acts (TILA) and (RESPA), respectively. These laws govern lending disclosures and will change the standards for securitization of certain mortgages. "We know that reporting of the Home Mortgage Disclosure Act will be expanded to include more data elements," Konyk explained. "There also will likely be other changes as regulators evaluate how these new rules are performing and identify areas where corrections or adjustments may be needed." Konyk says there is a lot to know about these new rules, and it becomes more difficult when a lender serves multiple states because lending across state lines is difficult. Lenders not only need to know federal laws, but also be familiar with laws in every state in which they are lending. In addition to observing federal and state laws, servicers must know rules in every community they service, which means they are dealing with a much larger array of regulations. Big companies are better able to cope than smaller ones, Konyk believes. "Large entities are able to hire people to keep track of changes and ensuring compliance with all these new regulations," he said. "Bigger companies are also more likely to have automated systems that, in addition to performing their operational functions, also serve as a virtual full-time tutor in observing regulations." "In a mid-sized company, most of the people need to spend their time taking care of everyday business and don't have sufficient spare time to monitor regulatory compliance," he explained. "Small companies that don't have a central computer system to keep up with all the rules have to rely on every one of [its] people knowing and remembering how to do the right thing, but that may not guarantee success in such a complex world." Attitude Is Part of the Success Formula I n addition to securing appropriate computer support and training for employees, part of the success formula is to maintain a positive mental attitude. The challenge for small companies is to not be overwhelmed and depressed by the enormity of all the changes. "The thing I see is that people look at what there is to be done and feel overwhelmed," Konyk said. "After the changes, there will still be a mortgage business, but it will look different. Once you learn the changes, they will become routine. Companies need to stay positive and remain focused on their goals." He added that it's important to pay attention and get it right, but don't get discouraged and think it can't be done. "Take one step at a time and work through it," he said. "Create a plan and follow it." Konyk advised to keep in mind that the recovery is essential because "what we do is fundamental to homeownership and to the country. What people don't seem to realize is that we are about to see more people enter the homebuying market than we have in many years." He explained that the generation of people we call the millennials (born from 1981 through 2000) is a larger group than the baby boomers, and they will continue to enter the traditional peak homebuying years (mid-20s to late-30s) throughout the next decade. "Because of this large segment of the population that will be coming into the market as the economy improves, there is going to be an increased demand for housing," he said. The M Report | 27

Articles in this issue

Archives of this issue

view archives of TheMReport - You Deal With It