The regulatory trickle-down effect is coming

Regulators changing focus to smaller industry players

If there’s one thing that has been hard to find in the mortgage business over the last few years, it’s a sense of security, a feeling that what we’re doing is beyond reproach or scrutiny simply because we’re following the rules. Many companies in this space have found out the hard way that operating within the lines is, in itself, no guarantee that some regulatory body or officer of the court won’t decide to investigate you.

Unfortunately, some bad actors have given the authorities plenty of reason to prosecute. Given this quickly changing environment, where the rules can change overnight and companies can be held accountable for errors made before the change, very few companies have any reason to feel secure.

Some have taken solace in the fact that being smaller than the first companies initially targeted by regulators, they are too small to attract the attention of an investigator. This feeling that the authorities have “bigger fish to fry” is a false sense of security. Soon, we expect that fact to be evident to all.

We call it the regulatory trickle down effect and we’ve seen it many times in the past. The regulator will start with the largest targets, moving quickly toward lawsuits or settlements and, in the process, shock most of the remaining players into making the adjustments necessary to become fully compliant with the new rules. It has been very effective in the past. But it doesn’t end there.

Eventually, the regulator will settle into the routine work of policing its rule set. It will go wherever it finds wrongdoing, even if that means investigating a smaller firm. Companies that think just because the CFPB, for example, has spent the last two years investigating the nation’s largest lenders and servicers, that it won’t also knock on their door are enjoying a false sense of security.

Even now, we see the issue of servicing transfers becoming more interesting to regulators. The signing procedures for these transactions have been examined for all the large banks, with some devastating consequences. More recently, regulators have targeted smaller firms.

The only security a lender can hope for in this environment is to choose partners who have already performed well in the face of regulatory oversight and have set the standards for the businesses in which they operate. Nationwide Title Clearing is one such company. Our practices have been examined by regulators and were found compliant. Our best practices have been adopted by many of the largest firms in our industry.

The regulatory trickle down effect will continue. Find your security with a proven partner. Call Nationwide Title Clearing today.

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