4 tips for mortgage lending compliance
The right assistance and resources make mortgage lending less intimidating.
Too many credit unions avoid mortgage lending because they fear compliance works like a game of pick-up sticks: fail to make the right move and the whole structure tumbles down.
In reality, credit unions that commit the right resources to mortgage operations will find they can help members buy homes while complying with regulations, according to Jeremy Smith, compliance manager for PolicyWorks LLC.
PolicyWorks provides consulting services for credit unions, credit union service organizations (CUSOs), and leagues. Its consultants aim to lower the frustration level for compliance by making it easier to understand.
Regulations and resources
Mortgage lending frustration can mount quickly due to the number and complexity of mortgage rules.
“The mortgage side is the most regulated side of the credit union world,” Smith says. “There are so many different moving pieces that can change depending on the type of mortgage being delivered, where the borrower is located and all the different nuances that go into the whole process.”
He says credit unions that launch or enhance mortgage operations typically choose between two approaches for managing risk, regulations, and resources:
- Developing an in-house operation, often with support from vendors, to develop mortgage products, provide loan origination, use technology tools to comply with regulations and interact with members.
- Working with a mortgage CUSO, which reduces expenses while delivering most services needed to offer mortgages.
Whichever route they choose, Smith advises credit unions to:
- Take time to ask questions and learn about current demands for mortgage products and mortgage compliance. Too many would-be mortgage lenders act on assumptions based on outdated knowledge, Smith says.
- Tap into the credit union community to get answers. Experienced credit unions are typically willing to share knowledge even when fields of membership overlap.
- Set clear goals. Instead of offering a “laundry list” of mortgages, consider selecting a smaller set of mortgage products that will meet most members’ needs.
- Consider using a CUSO. A strong CUSO can lower the cost and reduce the demands of mortgage lending.
Smith sees signs that regulators may soon clarify rules to simplify compliance. For example, he says regulators appear to be moving toward more flexibility related to borrowers’ ability to qualify for a mortgage.
Smith will address the CUNA Regulatory Compliance Certification School, March 31 - April 5 in Louisville, Ky.
“Hopefully what we’ll see in the next few months and years is that they’re trying to make compliance a little bit easier and more efficient,” Smith says.
That may help overcome some credit unions’ hesitation about mortgage lending.
“Credit unions sometimes get the wrong impression that mortgage lending is scary and risky and if we make one mistake, the whole house will fall down,” Smith says. “That’s not the case. Regulators and examiners will call out mistakes, but very few mistakes have the potential to cause lasting damage to the credit union.
“Don’t be afraid of jumping into mortgages. You have help and resources out there, and a lot of members need it.”