The cost of regulations

For me this week included spending time with veteran bankers and mortgage bankers in Northern California, Colorado, and Kansas City. What I see are a lot of people caring about and doing their jobs, and helping their clients in spite of the continued escalating cost of regulation (which is passed on to consumers) and the nebulous, impossible-to-keep-track-of, web of local, state, Federal, and regulator requirements & regulations. Some say that most LOs and brokers have given up, and have shifted the "keeping track" burden to processors, underwriters, pre-funding QC, and compliance personnel. Many would beg to differ, saying that the successful originators have a very good handle on compliance.

Understandably the CFPB doesn't appear to care about the cost of regulations, any more than an investor would care about a broker's cost of business, or you care about the cost of trucking paper towels to your store. Regardless, I received this note from a senior manager along the Atlantic Seaboard. "When I starting tracking costs in mid-2009, average fees for certain brokered loan services were as follows: average underwriting fee of $395, average appraisal fee of $250.

"The underwriting fee for a brokered loan now seems to average around $800 which can be attributed to additional regulatory requirements and time deadlines. The appraisal fee average is now around $450 in our state, primarily due to the addition of the AMC 'layer.'

"Also, back in 2009, I don't remember ever having a purchase closing where the title company acted as settlement agent; funds were normally disbursed through the attorney's trust account. While the trend towards attorneys farming out the settlement/disbursement responsibilities to the title agencies has expanded over the last few years, I believe that the last 'holdouts' of attorneys we regularly work with (which until now had still acted as settlement agent) have thrown in the towel and delegated settlement services to title due to TRID. So that adds at least another $375 to the cost of the transaction. The result is that a typical purchase loan at my shop now costs around $975 more than before the regulators added all this consumer protection."

I asked compliance expert Annemaria Allen who replied, "One of my compliance officers got this question the other day and our general advice was if the realtor wants a copy of the CD they can ask the borrower to provide them with a copy and the borrower may if they choose to.  The CD is provided by the lender for the benefit of the borrower. The realtors can get a copy of the settlement statement from escrow/title that show the settlement fees. We worry about sharing sensitive information, even with the borrower's authorization. Those are just our unofficial opinions and are not necessarily backed by any regulation. 

"In addition, if a Lender perhaps had an authorization form from the Borrower allowing them to provide the CD to parties to the loan transaction it might work but I would want to make sure that they have clear policy and procedures surrounding this and that the Borrower clearly understands the authorization form. I'm not sure that Lenders will want to take on this risk but it may be a Borrower by Borrower situation. Lastly, in past lives, when working for lenders and/or broker shops, we could never give HUD's directly to the Realtors - they had to get it from Escrow and/or the Borrower. Unfortunately there isn't clear regulation or commentary on this.  It's almost a 'Best Practice' that a Lender will have to implement and with that being said...keeping GLBA in mind."

"The HUD is gone! You can tell me the HUD is gone, but when we did the first closing and there was no HUD, it was astonishing. Look, this is just an outright abuse of Government power and it is basically mean spirited, arbitrary and capricious that they removed the HUD. It is like waking up one morning and all the stop signs in the US are now round and painted purple, not red and octagon-shaped. The HUD is the universal document that everyone, from the person working the front desk to the accountant wanting to do your taxes knows and understands universally. It is its' own language. Gone overnight. There was no reason for it being removed and I could explain it to a HUD novice in 15 seconds.

"I just came from an operations/pipeline meeting. The entire conversation was about dates, process to meet those dates, and deadlines that are arbitrarily set up about which the client could not care less. The client is being notified of things they are already aware of and trust us to deliver on it. If they knew that their process was getting delayed buy this, they would tell us to stop it. We are bothering the clients asking them to sign something that they already know is the case, but have to be bothered days before closing and again at closing. My staff is being distracted from their important work to meet dates that are irrelevant, the clients couldn't care less about and are very, very cumbersome.  We have Encompass, so I know much of the industry is struggling with the exact same issues. The client loses, the industry loses and the bottom line suffers for these Government inefficiencies. We are making changes to a process that has served everyone perfectly well for 50 years and have replaced it with a bureaucratic process that serves no body well: www.stopcfpb.com  is all I can say."