employees prior to the examination to review how they should conduct themselves and what to do if an examiner asks questions. That doesn’t mean that you don’t cooperate with the examiners or that employees should not be congenial, but you don’t want a careless employee talking about things that they don’t fully understand or trying to impress the examiners. Give the examiners plenty of room to work and as much privacy as possible. A large conference room works the best and you may need more than one. The conference room should have Internet connectivity and multiple phones. The examiners will tell you their specific needs. If possible, put them close to your Compliance Department or Legal Department—not next to your Underwriting or Sales Department. Try not to be intimidated by having 10 or more examiners in your office or having to deal with multiple requests for information at the same time. The EIC will manage the examiners and help them stay on track. You will need to work closely with the EIC to ensure they have the information they need, schedule meetings, etc. Make sure to introduce the EIC to your executive management team before the examination starts. Have a “kick-off” meeting so that the EIC and examiners can learn about your company and ask questions. This gives you the opportunity to put your company in the best light and explain your business model. Also, give
them a tour of your facility and discuss things like local restaurants and other amenities as most of the examiners will be visiting from out of town. One crucial thing that I learned is that administering the examination is more than a full-time job. While the examiners are on-site, the stress level can be very high. You must plan for other people to cover your normal job duties. Depending on the scope of the examination and size of the examination team, you will find yourself continually setting up and attending meetings, requesting additional information from other departments and clarifying information you just provided. During our exam, our director of compliance and I spent most of our normal business hours with the examiners and then used the evenings and weekends to catch up on our normal jobs. Adding to the fun, we had a state examination right in the middle of our CFPB examination. The state examiners actually worked from a nearby hotel because we were out of space. Talk about juggling multiple balls at one time! But the fact is, your business has to keep moving and you have to keep making and/or servicing loans while the examination is going on. This is the one area where I personally felt I did not adequately prepare. It was not the examiners fault. I wholly underestimated the amount of time we would spend with the examiners. I also recommend that you put your examination questionnaire information in a place where the examiners can easily access it electronically. They don’t want
tons of paper. Setting up electronic access will allow them to work from home and perhaps not spend as much time in your office. We set up a password protected website and arranged the content based on the order of the information requested in the CFPB’s introductory letter. This allowed us to monitor the information that was provided for each question in the letter and to monitor and review the additional information that was asked for during the examination. One question I get asked a lot at conferences and meetings is if there is a need to conduct a mock examination before the CFPB arrives. That is a difficult question to answer because it is fact dependent for each company. For example, how strong and experienced is your compliance staff? Do you have a lot of written policies and procedures? What is the culture of your organization as it relates to compliance? We did not do a mock exam but I know of some companies that did. To their credit, the CFPB has been very transparent on how they will conduct the examination and what they will review (view the CFPR Examination Manual at http://www.consumerfinance.gov/guidance/supervision/manual/). I am not aware of any differences in examination results that can be directly attributed to conducting mock exams or not. At this point, there may be enough information out about these examinations and how they are conducted to save you the money of doing a mock examination. However, that decision really is fact dependent on your company.
Another area where I get a lot of question is regarding the experience level of the examiners. Apparently a lot of you have heard that some of the examiners have little to no experience. In my personal experience, and based on what I have heard from others who have also had a CFPB examination, some examiners are more experienced than others. Most examination teams seem to be a mixed group when it comes to experience. That said, I give the examiners who examined us with little or no experience a lot of credit for being up front about their lack of experience and asking questions when necessary. While this contributed to the amount of time we spent with them, we were glad to answer their questions rather than having them make assumptions. You will also find that the strength and experience of your EIC will play an important role in how smoothly your examination goes, and, like examiners, some EICs are more experienced than others. I hope this information will be helpful if and when you get the call that “The CFPB is coming!” H. Burton Embry is senior vice president– enterprise risk management with Salt Lake City, Utah-based Primary Residential Mortgage Inc. (PRMI). He specializes in mortgage banking compliance and quality assurance and has more than 30 years of experience in mortgage banking compliance. He can be reached by e-mail at bembry@primeres.com. 51
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n Michigan Mortgage Professional Magazine n MARCH 2014