Written By: Frankie Lacy, Op-Ed Writer
2013 brought major changes to mortgage lending with the introduction of new regulations, the end of the mini-refinance boom, and an intensified focus on quality. As we prepare to conduct business in the new year, we can reflect on how those changes will impact us as mortgage processors and underwriters.
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#1 Get Comfortable with the CFPB
The Consumer Financial Protection Bureau has introduced many new regulations that must be adhered to effective January 10, 2014. They are making sweeping revisions to the way we conduct business and they have already begun to enforce their new rules. The CFPB openly advertises the cases that they have successfully won against financial institutions of all kinds. They are on a mission to protect the American People from abusive lending practices. As a result, you can expect to hear a lot about them, their new rules, and how you are expected to implement those rules in your function. Employers will expect prospective employees to be familiar with the CFPB’s rules, terminology, and the consequences of non-compliance.
#2 Purchases Take Precedence
Rates increasing and a wave of HELOC’s (home equity line of credit) scheduled to reset in 2014 means that many existing homeowners will be priced (through rates or lack of equity) out of the refinance market. As a result, purchase transactions will be high on your loan originators’ lists. Familiarize yourself with the underwriting guidelines that are unique to purchase transactions. Refresh yourself on reading purchase agreements and new construction contracts.
#3 Mortgage Education is Essential
The Ability to Repay and Qualified Mortgage underwriting rules outlined in Appendix Q require a more in-depth analysis of credit, income, asset, and collateral documentation. Underwriters and processors will need to increase their loan analysis expertise to add value to their current or prospective employers. Companies seeking new talent will likely conduct testing as a means of narrowing down their applicant choices. As a result we must have a strong comprehension of mortgage formulas, Fannie Mae and Freddie Mac’s lending guidelines, and generally accepted documentation requirements.
#4 Quality Over Quantity
Although production is always a priority in any mortgage shop, quality will take an unprecedented priority in 2014. With the inception of the rebuttable presumption and safe harbor rules enacted by the CFPB, mortgage lenders will sustain heightened liability for non-compliance with lending guidelines. As a result, lenders of every size and type will require high quality reviews of loans from all operations staff members. The margin for error will shrink and responsibility for insuring quality will rest on all our shoulders.
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2014 will see an increased demand for a more professional, high-skilled labor force within the mortgage industry. Those who wish to cut corners and rush the process for a quick dollar will suffer heavy and long lasting consequences. Those who embrace the need for knowledgeable and ethical lending can continue to enjoy a lucrative and long-lasting career as mortgage professionals.
About The Author
Frankie Lacy - As an op-ed writer, Ms. Frankie Lacy is a 15+ year mortgage industry veteran with extensive conventional mortgage underwriting experience. Topics of Frankie's expertise include: Fannie Mae, Freddie Mac, USDA Rural Housing, underwriting to investor overlays, self-employed borrowers, personal and business tax return analysis, rental income, condos/co-ops/PUDs, and more. Frankie is a Davenport University graduate with a degree in Business Administration.
