Here’s something to think about:

  • politics without principles
  • wealth without work
  • pleasure without conscience
  • knowledge without character
  • commerce without morality
  • science without humanity
  • worship without sacrifice

Are there any nuggets here you can relate to?  Is there anything our industry might learn from these?  It is a portion of a speech by Gandhi.
I had lunch yesterday with the owners of ComplianceEase.  They provide various services to mortgage bankers to assist loan level compliance with state and federal guidelines.  They also provide a service to ensure mortgage originators have valid state licenses.     After discussing various industry issues and impact of regulator changes, we honed in how some in our industry have historically not taken quality control and compliance serious.

Most mortgage bankers like to focus on the sizzle:  Loan production, branch expansion, secondary market, technology, ABAs, etc.  For many executives, compliance and quality control are cost centers of an organization and considered only overhead.  Though many companies have policies and procedures covering compliance and quality control, the actual execution is poor.  Many of the policies have been plagiarized from outdated documents and have never been reviewed or updated.  There are no management reports, meeting minutes or board discussion on quality control or compliance.

During our FOCIS warehouse audit review, we find many companies are not current on post funding quality control or management responses.  Many have little pre-funding quality control and compliance reviews.   Though their policy is to be compliant and originate quality loans, there is little evidence of validation. 

We find many times competition and cost drives the decision for companies to perform quality control and compliance reviews.   There is an initial cost to perform the reviews, but the consequences of poor loan quality and compliance violation can be very expensive.  We’ve seen state regulators impose six figure fines on companies for violation of state regulations.  And the repurchase of one loan and corresponding loss can more than offset 6 months of profits. 

Take QC and compliance serious; Pay now, or pay dearly later.