Why Do I Need a Compliance Management System? By Joy K. Gilpin
OCTOBER 2013 n Pennsylvania Mortgage Professional Magazine n
NationalMortgageProfessional.com
94
I wanted to explore a question that my team frequently gets: Why do I need a Compliance Management System? While there are many strong reasons why you need one, there is probably one critical reason … because the Consumer Financial Protection Bureau (CFPB) says so. For all supervised entities, the expectation is to have a true Compliance Management System in place that is appropriate for the size and scale of your organization. This is emphasized in several documents, including the Supervision and Examination Manual, which gives you guidance on an examination, as well as the recently released 2013 CFPB Dodd-Frank Mortgage Rules Readiness Guide which includes a questionnaire to evaluate your current progress complying with all of the new mortgage rules. The CFPB has come out and stated pretty clearly that in their opinion, weaknesses in a Compliance Management System can really result in violations of law or regulations, each of which are associated with harm to our consumers. So then, what is a Compliance Management System? While there are many components that go into a true Compliance Management System, essentially it is a program designed to ensure that the policies and practices that are implemented in your business operations are in full compliance of federal financial consumer law. That’s the big picture that we are trying to get to. When you think about it, a Compliance Management System, when properly structured, establishes compliance responsibilities. It then communicates those responsibilities to employees and associates. Also, it gives you a vehicle to incorporate policy and procedure into business process. Finally, it creates a responsibility for meeting those requirements through internal policies and creates ownership or accountability by ensuring that those acts, policies, and practices are carried out and that legal requirements are met. This process is validated by regular and scheduled review, and, as needed, implementation of revisions for corrective action. It’s all part of a larger working solution in which each piece supports the overall objective of adherence with consumer financial law and regulation, as well as consumer transparency and advocacy. Ready to get started? The AllRegs Compliance Management System can help. Our comprehensive compliance solution can help you with the following features: l l l l l l
Audit all policies and ensure that you have the correct policies in place Policy authorship as needed Deliver training on policies Archive and track what policies were live at anytime Assess and test staff on the policies after they read them Conduct training for your Board of Directors and all employees as applicable l Provide one system of record for all reports For a personal consultation on your AllRegs Compliance Management System needs, call your dedicated account executive at (800) 848-4904 or visit www.allregs.com and click on “Compliance Management System” to request a demo. Or, get more information about AllRegs and the full suite of products and services by visiting www.allregs.com today. Joy K. Gilpin is professional services manager with AllRegs. She may be reached by phone at (800) 848-4904.
SPONSORED EDITORIAL
A Tough Road for the Independents Average Profit Per Loan
Average Production Volume
2Q-2013 $1,528 1Q-2013 $1,772 4Q-2012 $2,256 3Q-2012 $2,465
2Q-2013 $439 million 1Q-2013 $442 million 4Q-2012 $448 million 3Q-2012 $450 million
2Q-2013 $5,818 1Q-2013 $5,779 4Q-2012 $5,603 3Q-2012 $5,163
2Q-2013 $3,808 1Q-2013 $3,785 4Q-2012 $3,570 3Q-2012 $3,320
Total Loan Production Expenses Per Loan By Phil Hall During the past four quarters, independent mortgage banks and the mortgage subsidiaries of chartered banks registered rather disturbing data in regard to their average profit per loan and origination expenses. According to data released by the Mortgage Bankers Association (MBA), independent mortgage banks and the mortgage subsidiaries of chartered banks made an average profit of $1,528 on each loan they originated in the second quarter of 2013, down from $1,772 per loan in the first quarter, and even further down from $2,256 per loan in the fourth quarter of 2012 and $2,465 per loan in the third quarter of 2012. According to the MBA, the average production volume for this section of the industry was $439 million per company in the second quarter of 2013, down from $442 million per company in the first quarter, $448 million in the fourth quarter of 2012 and $450 million in last year’s third quarter. The volume by count per company averaged 1,921 loans in the second quarter, down from 1,954 in the first quarter and 2,132 in the fourth quarter of 2012—up slightly from 2,010 loans in the preceding quarter. The securitization side of the business also witnessed shrinkage. Secondary marketing income declined to 263 basis points in the second quarter, compared to 274 basis points in the first quarter, 279 basis points in the fourth quarter of 2012 and 271 basis points in the third quarter. On the flip side, total loan production expenses—defined by the MBA to include commissions, compensation, occupancy, equipment, and other pro-
Personnel Expenses Per Loan duction expenses and corporate allocations—increased to $5,818 per loan in the second quarter, from $5,779 in the first quarter. During the second half of 2012, total loan production expenses were $5,603 in the fourth quarter, up from $5,163 in the third quarter. Also on the rise were personnel expenses per loan, which averaged $3,808 per loan in the second quarter, up from $3,785 per loan in the first quarter, $3,570 per loan in the fourth quarter of 2012 and $3,320 in the third quarter. For the industry’s independent players, these numbers are reason for concern, if not anguish. If the past four quarters are any indication, mortgage banking has simultaneously become less profitable and more expensive. And in view of the current political and economic environment, one doesn’t need to claim psychic powers to predict there will be no radical turnaround in these depressing trends in the coming quarters.
How will this all shake out? Consolidation has already percolated within the industry, and it would not be difficult to imagine this will boil further if operating expenses become too grand for smaller companies to handle. The fear of the new federal rules and regulations that are set to take root in January has further clouded a difficult situation—what will happen when they actually go into effect remains to be seen, though no one is anticipating a quick boost to new profits. Phil Hall is senior editor of National Mortgage Professional Magazine. He may be reached by e-mail at philh@nmpmediacorp.com.