After more than a year of preparation for many companies in the mortgage industry, we are now just days away from the Consumer Financial Protection Bureau’s deadline for compliance with the new Qualified Mortgage rule. As I’m sure every reader of this blog knows, all loans started after January 10, must be sorted into one of the three new buckets.
Back when I started in this business, we used Excel spreadsheets for much of the analytical work required to keep our business on track. Some executives out there now are probably still trying to put all the calculations into a handy worksheet. Some of you younger readers are laughing, but it can be very hard to let go of the safeguards that have protected us over the years. That’s part of the reason that we still use so much paper in a process that is, for the most part, already electronic.
I expect we’ll see some lenders holding on to their paper files for a while longer, but when it comes to compliance, only lenders that modernize will succeed. It’s not that the rules are so complex, although there are a number of calculations that must be made for every new loan that enters the pipeline. The cost of non-compliance is simply too high to allow an error to enter the system.
Some lenders have spent the money to create their own compliance technologies, but it has been a long and costly process. Furthermore, they won’t really know if these tools work until they turn them on this Friday. Even then, they’ll have to spend the resources to train their staff on how to use them and then cross their fingers that no one messes it up.
We released our compliance suite months ago and have been actively testing it since then. It works and lenders that use Marksman for QM compliance will have no problem reading the color-coded reports that spring up at the touch of a button when the loan enters the pipeline and then again when the loan is locked. If the lights are all green, the loan is a go! If not, the software will tell them exactly where they missed their target and by how much.
The suite is tested and ready for QM, but also for HPML, HOEPA, LO Comp and Anti-Steering. After all this preparation, many lenders may find this a bit anti-climactic, but I have a feeling they’ll appreciate that.