A compliance burden
The mechanics of mortgage originations aren’t what concern credit unions most, says Tom Pisapia, executive vice president at QR Lending Inc. Their greatest worry is keeping up with compliance mandates.
“We’ve seen six new regulations in 2009,” he says, “and an additional four in 2010, and there have been continuous changes in [secondary market] and private investor underwriting and appraisal requirements. This has been one of the most complex, far-reaching periods of compliance change in the history of mortgage lending.
“The penalties for noncompliance,” Pisapia continues, “can range from having unsalable loans, consumer refunds, and reputational risk to audit and examination issues.”
To overcome compliance challenges, credit unions can hire people in-house who have the right mix of expertise, he says, or they can team up with a partner that can alleviate the burden.
Technology is also key in the implementation and monitoring of compliance changes, Pisapia adds. “It’s impossible to manually perform all of the steps that are necessary to remain in compliance throughout the mortgage process, from origination to closing to servicing.”
Still, mortgage service providers have developed systems for quickly integrating credit unions into the market. “We start by analyzing a client,” says Clampitt. “How much risk tolerance does it have? How much staffing does it have and at what level of expertise? We don’t try to fit credit unions into our peg; we meet their needs.”
CU Members Mortgage offers a soup-to-nuts approach to clients, she adds. “We have a B2B site that includes start-to-finish services, including regulatory compliance, auto-decisioning apparatus, fraud guard, and more. We can help clients originate loans or increase staff expertise.
“Education has become a huge component of what we do,” Clampitt continues. “Credit unions are clamoring for information, especially regarding the regulatory environment. We offer many webinars and online sessions.”
Pisapia says most of QR Lending’s credit union clients prefer to use its wholesale channel, where the company supplies the loan technology, vendor integration, credit scoring, and underwriting.
“We’ll work with credit unions in any capacity,” he says. “Some credit unions come to us with no expertise but recognize that providing mortgages is an essential part of serving members.
“Others have a mortgage operation in place but are overburdened by compliance and investor changes. Either way, we’ll tailor a set of services that fit their needs.”
The FICS suite of mortgage origination and servicing software includes rules-driven apps that allow credit unions to scrutinize a loan’s viability to make sure it qualifies to be held in-house or sold on the secondary market, and to make sure it’s in compliance.
Malone is optimistic about credit unions’ mortgage prospects. “Collectively,” he says, “given the opportunity, I think credit unions can do extremely well in the mortgage arena and continue to grow their share of the mortgage market.”