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TH E M R EP O RT | 27 FEATURE TH E M R EP O RT | 27 Regulatory requirements have set off a chain reaction of events in the mortgage industry, causing mortgage companies to ramp up their compliance efforts, implement innovative technology, and plan for the future. By Xhevrije West S ince the creation of the Consumer Financial Protection Bureau (CFPB) shortly after the worst financial crisis since the Great Depression, compliance in the mortgage industry has become paramount for success. Compliance obligations stem- ming from the CFPB, Office of the Comptroller of the Currency, Securities and Exchange Commission, Department of Justice, the National Mortgage Settlement, states' Homeowner Bill of Rights, client audits, and individual investor guidelines can be a heavy burden to bear in the housing market, but with the right tools and employees, a company can ensure that they stay out of regulators' way. Tipping Point W hile the mortgage indus- try continues to navigate through the murky waters of compliance with state and federal regulations, their business practic- es have also completely changed. With regulatory oversight con- tinuing to weigh heavier on the mortgage industry, compliance may be the only solution to avoid fines and penalties. "Compliance is required by law," said Chad Jampedro, President at GSF Mortgage Corp., a direct mortgage lender with 20 years' lending experi- ence. "Accordingly, compliance is important in order for a mortgage lending company to remain in good standing with state and federal authorities and to maintain a positive reputation within the mortgage industry and the local community. Mortgage companies can ensure compliance by institut- ing a quality control policy to be followed by company employees and affiliates." But there are some who believe the dominoes of compliance will not come crumbling down on their business—that is until federal entities hit them with penalties. Mick Kless, CRVPM, President, and CEO of The Compliance Education Institute, said, "I think that the biggest issue with all of the financial services industry is thinking that nothing bad will ever happen and waiting for their examiner to tell them what to do instead of doing what they know they should do. It's not a matter of if something bad will happen; it's a matter of when. I have always be - lieved that being compliant begins with a strong educational founda- tion, so introducing a compliance education training curriculum goes a very long way to understanding what needs to be done, how to do it, and what the benefits are." With all of the operational chang- es that compliance encompasses, rule obligations are often an added stress on mortgage companies. "Given the multitude of things and processes that are touched as a result of these regulations, it adds a great deal of stress to the franchise to ensure that they've teed up to cover all of the potential implica - tions within their processes. So it has a fairly extensive impact across the franchise," said Jerry McCoy, Senior Advisor to The Collingwood Group. Technology providers are focused on improving the auto - mation of the mortgage lending process from start to end, im- proving and increasing the use of eSign technology, and transition- ing to an eClosing process, said DocMagic's Chief Compliance Officer Gavin Ales. Between the Spaces O ftentimes, when regulatory entities set forth new rules for the mortgage industry, there are typically a few blank spaces in the rule that leave companies question - ing what exactly they are sup- posed to do to stay in compliance. Ales explained that when the CFPB said that it would be sensitive to "good faith" efforts to comply with its TILA-RESPA Integrated Disclosure (TRID) rule, no further specifics were ever given as to what exactly that meant. "That's all they did, they just said they would have a system and wouldn't provide any more guidance. The focus just shifted to what is it that the investors are going to accept. That has the more real implications for our lender clients, with regard to li - quidity," he said. "There definitely are some gray areas in the rule. I don't know that it's possible for them to have covered every situation, but of course that's what we all want. It definitely does produce a bit more pain in this whole learning process that the entire industry is going through." Scott Alexander, Operations Manager at Assurance Financial, agreed that interpretations of regula- tions are not always given to the full extent. "We don't always get The Domino Effect of Compliance