In the midst of the Know Before You Owe or TRID rule implementation which she says "devoured the industry's bandwidth," Faith Schwartz, Corelogic's Senior Vice President, Government Affairs, finds some reasons to cheer and to buck the industry current of CFPB bashing.
Writing in the company's Insights
blog, Schwartz says that, while innovation has taken a backseat to compliance
as the housing finance industry coped with new rules and regulations, "not all
the changes that regulators have wrought have been negative. In fact, some might be setting the stage for
It was CFPB (the Consumer Financial Protection Bureau) that delivered
TRID. She said, but the ideas behind it are laudable over time, making the
mortgage process more transparent and understandable. CFPB is also one of the biggest advocates of
e-closings which the mortgage industry has talked about for years but hasn't yet
achieved. Hopefully the pilot study the
bureau is conducting will demonstrate their value to consumers and industry and
bring closer the day of simple and paperless closings.
She also touts the eventual value of the new Home Mortgage Disclosure Act
(HMDA) reporting rules, agreeing that it is a big effort for lenders to comply
with the massive data requirements and will become more so with new
transparency mandates. However, "The Bureau's
intention is clear: full pricing and credit transparency for nearly every
mortgage loan originated. This has always been inferred, but in the future
lenders will have to capture and report significantly more data." She predicts that over time lenders and other
stakeholders "will find a cadence with this new reporting requirement and
readjust for a new approach to lending reporting standards" and that increased transparency
is a positive for consumers and investors as well if credit standards rise.
She also praised progress made toward the new common securitization platform
even if other aspects of GSE reform have faded into the background. The Federal Housing Finance Agency (FHFA) Scorecard
for 2016 indicates the first release of the new platform, which involves existing
Freddie Mac single class securities, will come this year. It will be followed by implementation of the
single-security on the common platform by both GSEs in 2018. "When it is ready,
the common platform will support and enhance the agency market, and make a new
single GSE security possible," Schwartz says.
Regulators have significantly altered the way the mortgage industry has
originated and serviced loans over the last seven years and this has caused a
great deal of disruption and discomfort to legacy players. She quotes an expression used by management
consultants to explain why companies and industries resist new ideas. A "phenomenon limited repertoire" means that
managers believe that the way they have done something is the only way to do
it, "and they tend to remember how deviations from the norm had failed in past."
This has created openings for new entrants--non-bank originators, private
equity and hedge funds, mega-special servicers and now fintech companies-who
are eyeing opportunities that were once the sole province of the federal
agencies and big depositories. These new
entrants aren't worried about how things have changed, she points out. Instead
they are focused on using new technology to drive inefficiencies out of
originating and servicing loans. "In 2016 and beyond, this kind of thinking
will drive innovation."
So, she concludes, "Maybe there is a silver lining to the regulatory cloud
that has been hanging over our industry."