"One kind word can warm three winter months."–Japanese Proverb
Winter is the time to prepare for the year ahead and enjoy the camaraderie of those around you. It is best to start with your credit union’s compliance manager.
First, give this person a work-appropriate hug—it’s going to be a rough year.
Second, talk to your compliance manager about how your credit union will handle the new rules and what compliance resources you have at your disposal. Is your compliance manager up to the task alone? How deep is your compliance bench if this person leaves?
Remember, this is the most extensive regulatory overhaul of mortgage lending in a generation. The regulatory burden for mortgage lenders has increased permanently.
Now is the time to determine where the extra help will come from, whether it is added staff, consultants, or third-party vendors. These individuals will be in high demand this year and will need time to understand your organization and learn the new rules.
"As sure as the spring will follow winter, economic growth will follow recession."–Bo Bennett
Spring has always been a time for optimism, but it is also time for a good spring cleaning. This spring will be the time to dust off your credit union’s mortgage policies and procedures and, more importantly, your goals and strategies for the mortgage team and products.
At this point in the year, more will be known about the potential effects of the new rules. For instance, the Ability to Repay rule will change how credit unions document underwriting decisions and formulate their risk tolerance for certain types of loans that are not considered “qualified” mortgages under the rule.
It will be tempting to respond only to the specific requirements of the new rules, but it would be a mistake to miss the opportunity to address the future.
The mortgage rule changes will present an opportunity for credit unions to plan for what their mortgage business should look like in a recovering housing market (albeit, slow recovery) for the next few years, and what it should look like for the next decade.
"Some people forget to plant in the spring, idle away the summer hours and then expect to reap in the fall."–Unknown
Summer is the time to put in the hard work tending to the seeds of the mortgage strategy your credit union developed in spring. Remember, seeds need care, water, and sunlight to grow into healthy plants.
Similarly, your credit union’s mortgage staff will need quality training to execute your lending strategy. This will be the time of year to develop training for your staff to understand the new rules and how the changes will affect the way they make loans.
Some aspects of the relationship lending model credit unions have relied on in the past will change as the underwriting requirements of the Ability to Repay rule will make the mortgage application process more demanding on the member.
How your staff responds to these pressures on the member will determine whether your credit union develops a competitive advantage in the mortgage market. Make sure your staff gets the tools it needs to respond strategically.
Also remember, the CFPB will not be taking a summer vacation. The first green shoots of the mortgage rule changes will sprout June 1, as the mandatory compliance dates for some minor provisions of the appraisals and mortgage loan originator rules come due.
Additionally, the CFPB is currently aiming to release the final RESPA/Truth in Lending combined disclosure rule in September.
"Credit unions did not cause the financial crisis. Their traditional model of relationship lending has been beneficial for many people….They find ways to make loans that respond to personal situations and cannot be captured by any generic metrics." – CFPB Director Richard Cordray.
Autumn will be the time to harvest the rewards of your hard work throughout the year. At this point in the year, the compliance date for most of the final rules will be right around the corner (mid-January 2014).
If you have successfully planned for success throughout the year, the harvest season can be a time to celebrate instead of panic. In that spirit, don’t forget to celebrate your success with potential borrowers in your community.
Although it is easy to react to the new rules as a compliance burden, it is also an important opportunity to demonstrate the values of the credit union movement to a new generation of homebuyers and potential members.
Credit unions did not create the need for the new mortgage rules. But how we respond to the rules this year provides one of the best opportunities to differentiate credit unions from those lenders that did create the need for the new mortgage rules.