Imagine playing a sport where every 20 minutes or so the referees, who don’t really understand the game to begin with, change the rules, bench some of your team mates, and award points to the other side just for the hell of it, based on whatever nonsense complaints they’re hearing from the stands.
Now imagine instead of a sport it’s your profession, the business you’ve put your heart and soul into, oh, and the dozens -- maybe hundreds -- of jobs you’ve created.
Welcome to mortgage servicing in 2015, because that’s the attitude of a lot of people walking around at MBA Servicing 2015 at the Gaylord Texan. (More than 2,000 have braved the unusual Texas cold freeze to attend, by the way.)
I bring up the sports metaphor because as I sat in a session listening to Jean Healey, Senior Counsel for Enforcement Strategy, Northeast Region of the Consumer Financial Protection Bureau, in a session laughingly titled “What to Expect from Enforcement Actions.”
As if the CFPB, with its arbitrary enforcement and surface level understanding of any industry could possibly provide any kind of consistent, predictable behavior for an industry as complex as mortgage servicing.
And as Healey droned on about the Flagstar decision from two years ago, which supposedly established some kind of baseline – all I could think of was that guy from high school who 10 years later keeps talking about his catch in the big game.
Maria Moskver, chief compliance officer and general counsel for the Walz Group, put it best when she said that mortgage servicers face a world where state and federal regulations are continuing to evolve half a decade after Dodd-Frank was enacted.
“The CFPB is continuing to refine regulations,” Mosker said. “There are amendments to the rule and a constantly shifting landscape in terms of complying with them.”
Normally lawyers and corporate counsels love regulations in the sense that it’s job security. Not the ones I talked to – they said they’d find other things to bill for, they just wish there clients weren’t being buried under mounds of regulations written by people who don’t understand the mortgage industry to begin with.
This was something I heard from just about everyone I spoke to at the conference. I admit it plays to my own biases, but this was the sounding at every depth.
The regulations aren’t just burying servicers – it’s burying consumers. Consider the mortgage disclosure avalanche. In theory, the more information a consumer has, the better.
But be honest – you’ve never read the Apple licensing agreement you click on every time you update your software. The mortgage disclosure forms that are mandated today – people are about as likely to read those as Kanye is likely to read a book.
These regulations were written based on technology that was old a decade ago. (It really takes all that time and paperwork to verify income? You think so?)
This whole thing is like handing complex machinery over to monkeys. It's like watching Derek Zoolander and Hansel look for files inside the computer.
These are laws written by law school graduates who don’t understand business in general, or this business in particular. Heck, the servicer lawyers who specialize in this business don’t understand it completely. How well can some lawyer with no private sector experience who couldn’t find gainful employment in the private sector?
These backwards rules are crafted where everything not forbidden is mandatory and everything not mandatory is forbidden. The laws are designed to protect the lowest common denominator, the kind of people who are the reason there are tags on hair dryers warning you not to use it while in the shower. No wonder the disclosure forms alone are as long as they are.
No one is saying we need laissez-faire in mortgage servicing. But there’s no reason it has to be like this.
You need simple rules that prevent the worst kind of behavior. You need a system where consumers can bring grievances, and every grievance doesn’t have to turn into a prohibition or statute. You need simple disclosure that people actually read.
That’s not what we have now. Servicers – as well as lenders and, come to think of it, every other business in operation, shouldn't have to act by permission. They should only be sanctioned when they violate a clear set of basic rules.
A company shouldn't be presumed guilty until proven innocent. This micromanaging by people who don't understand the business is what's going to kill it.
What will have you then? Servicing will have to be taken over by the same people who run the post office.
It’s appropriate that the first day of the conference, Texas got its first big bout of freezing weather. I couldn’t come up with a better metaphor for the state of the industry.
There's no political will to fix this in Congress. It's not a sexy issue and any attempt to impose any sort of reason on the system is met with either pearl clutching about deregulation or moves to game the system for one interest or another.
Moskver says servicers need to be more proactive. But how much does the industry have to give?
The regulatory bureaucracy is like Lennie Small in “Of Mice and Men” – a well-meaning giant, but the attic ain’t been used in years, and you can't keep handing him rabbits.