MReport March 2017

TheMReport — News and strategies for the evolving mortgage marketplace.

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22 | TH E M R EP O RT FEATURE I n financial services com- panies, compliance depart- ments necessarily set up processes to dispense their duties with independence. Maintaining compliance is a com- plex task and, as a result, many financial services companies view their compliance departments only as cost centers or, worse, as obstructionists. But companies that leverage today's advanced regulatory technologies (RegTech) can turn that notion on its head. Compliance departments using more sophisticated quantitative analytics can drive data quality, which leads to better decision- making and management insights, while the efficiency that should go along with compliance excellence can benefit institutions and their customers. Today, it is easy to find compliance departments that are under-leveraged by management as a source of business intelligence and operational insight. Aided by the growing adoption of software- as-a-service (SaaS) tools, which can access and analyze changing data sets more rapidly than their desktop predecessors, compliance managers stand uniquely poised to share up-to-date information about lending practices, com - petitive benchmarks, and data quality across functional groups. Introducing earlier, enterprise- wide discussions driven by the compliance function represents a paradigm shift that can help organizations proceed with confi- dence to explore revenue streams, unearth inefficiencies, and grow margins. Some specific examples include: • • Redlining•analyses•and•lend- ing•patterns:•The Consumer Financial Protection Bureau (CFPB) has garnered headlines for its expanded efforts to crack down on lending discrimina- tion, including on geographic bases (traditionally known as redlining). The same tools that analyze demographic and geographic lending patterns can simultaneously discover patterns that inform decision-making in expansions, asset acquisitions, and marketing campaigns. • • Home•Mortgage•Disclosure•Act• (HMDA)•and•application•data• quality:•Before submitting a HMDA Loan Application Register (LAR) each year, lenders must audit (or "scrub") the data to ensure accuracy. Best-in-class technologies include business rules that provide a feedback loop on quality to the origination function (e.g., identifying consistent errors in application data quality coming from one branch or loan officer). This type of feedback can elevate operational quality across many bank functions, avoiding costly remediation later. • • TILA-RESPA•Integrated• Disclosure•(TRID)•rule•and•process• quality: Full compliance with the "Know Before You Owe" mortgage provisions of TRID require that technology and pro - cess work together. Loan officers, underwriters, bank managers, and consumers all want to proceed through a loan process with accuracy and confidence. A successful TRID program lever - ages technology that generates process efficiencies and increases loan quality beyond TRID compliance. Changing the Culture T o reposition compliance as a source of competitive advan- tage, managers can introduce small changes, dismantling organizational habits and perceptions that com- monly get in the way of healthy, regular exchange of data and ideas. For starters, managers can encour- age group leaders in marketing, operations, and other departments to interface routinely with compli- ance personnel to discuss trends. These sessions can reinforce the concept that compliance is a two- way partner capable of helping an organization make better data- based decisions and not a one-way enforcer where data simply goes to be reported to external stakehold - ers such as regulators. The cultural change also applies to the compliance department itself, where team members may not understand how their core respon- sibility of protecting the company against risk is enhanced rather than diminished by championing data quality and compliance acumen. Compliance professionals often gain fresh insights stemming from regular work with core bank tech - nology and compliance tools. Many such observations can be shared to enhance business understanding of customers while also being used to enforce the proper compliance stance. Discussion of insights can go a long way toward elevating compliance beyond the "cost cen - ter" pigeonhole. Activating Benefits R eimagining compliance data for business intelligence can take concrete form in business activities, including the following examples: • • Product•development•and•market- ing:•Fair lending data tools that identify geographic and demo- graphic patterns can provide powerful input to product development and market expan- sion as well as feedback on the performance of products in the market. What is the level of product uptake in specific markets? Who is the market - ing message reaching and how effectively? Which branches are selling which products? Which From Oversight to Insight By leveraging compliance departments with more active, connected roles, financial services companies can reap broader, more dynamic data and, consequently, a competitive edge. By Luke Wimer and Rob Tedesco

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