One of the unintended consequences of starting the swing of a pendulum is that all too often it swings too far in one direction or the other, and in so doing tends to overcorrect itself. That is certainly what is taking place in the “pendulum” of mortgage servicing regulatory compliance. Because of real, and in some cases, “perceived” problems with servicing organizations serving the needs of consumers, over-regulation has clearly crippled servicers.
While attending the 2015 Mortgage Bankers Association Servicing Conference held recently in Dallas, it was as evident to me as the frozen nose on my face (an ice storm hit town the same time as I did) that the main topic of various discussions centered on compliance issues. So onerous have these Dodd-Frank-inspired regulations become that many among the noted panelists and rank-and-file attendees expressed their concern that mortgage servicing itself is becoming a “not-for-profit” undertaking.
Some would argue that mortgage servicing organizations brought over-regulation down upon themselves, and there are certainly many examples of this. But the Consumer Financial Protection Bureau, which is populated by no shortage of career government bureaucrats, attorneys and others who know very little about, or possess very little mortgage servicing experience, are creating an avalanche of regulations that are purportedly born out of consumer complaints. And it doesn’t seem to take many of said complaints regarding any number of “evil-spirited” servicer-related consumer slights to give birth to more and more wide-ranging (and costly) regulations.
As David Vida pointed out in his article, “Frozen: The state of mortgage servicing today,” which was published recently in HousingWire, what the regulators and GSEs want is perfection – zero defects. While I believe that by striving for perfection, which of course is unattainable, you will achieve excellence, I also know that managing to an exception is not an efficient or cost-effective business pursuit.
Vida also alluded to the fact that one way to improve servicing, and perhaps have the pendulum swing back a bit toward reduced regulations, would be 24/7 workforces to handle 24/7 queries – a very expensive proposition for short-margin servicers, unless you offshore your customer service call center (which is quite rightly frowned upon by many in this country).
Certainly, technology advances are going to help servicers find better, more efficient ways to become more profitable while adhering to compliance mandates, as will the continuous improvement of policies and procedures. But there also needs to be a healthy dose of servicing-centric common sense injected into the regulatory compliance patient.
Unfortunately, common sense is in short supply these days, particularly within the bloated bureaucracies in, and associated with, all things governmental.
Some argue that because there are so many attorneys connected with the government, that a return to the good old days of common sense being the engine of sound management (and almost everything else, like, say, relationships, the difference between good and bad, contractual agreements, etc., etc.) may never return. Rubbish.
What it would take to bring back common sense with respect to servicing regulations is simply the will to do so… and hiring the right people to oversee the regulatory process. If there is no political will to scale back the Dodd-Frank regulations and the CFPB it spawned, at least find qualified individuals who have the experience and knowledge required to oversee such regulations and bureaus.
Put qualified, experienced people in charge who clearly understand the entire mortgage servicing process and who are the best there is at finding the most effective efficient solutions to correct the real problems hurting large numbers of consumers – not a little Band Aid here and another one over there on a “perceived” indignity or slight perpetrated on an individual.
I am in no way down-playing the need for oversight, but I am suggesting that over-regulation is not the answer. After all, it is only common sense to point out that in the case of mortgage servicing, just like in so many other private sector industries, the government cure is worse than ailment.