FI compliance concerns, costs skyrockets, reports confirm

October 15, 2014

WASHINGTON (10/16/14)--New regulations are raising compliance costs and concerns, according to several surveys of financial institutions released Wednesday.

Mortgage lenders have reported compliance costs are up nearly 30% over the past year, and compliance concerns at U.S. financial institutions are also up nearly 30% from January 2013.

The Office of the Comptroller of the Currency, Consumer Financial Protection Bureau and Federal Deposit Insurance Corp. have all issued rules and regulations affecting the mortgage industry in the last year.

Fannie Mae's Mortgage Lender Sentiment Survey polled senior mortgage executives in August and found:

  • eventy-two percent of the lenders surveyed say the new regulations have had "significant" impact on their business. Mid-sized lenders (84%) are more likely than smaller lenders (62%) to report significant impact, with 73% of larger lenders reporting significant impact;

  • eventy-two percent of lenders reported spending more on compliance in 2014 than in 2013. Across all lenders surveyed, institutions reported a median increase of nearly 30% in compliance spending. Mid-sized lenders reported the largest increase of 50%, on average;

  • Post-closing quality control review and servicing are the business functions most commonly reported as being outsourced as a result of increased regulations and associated costs. In addition, mid-sized lenders are more likely than smaller lenders to outsource compliance and legal functions; and

  • Compliance risk is reported as the top area of focus by most lenders. In addition, larger lenders are more concerned with operational risk while smaller lenders are more concerned with credit risk and interest-rate risk.

Wolters Kluwer Financial Services also conducted its Regulatory and Risk Management Indicator, which began with a baseline score of 100 in January 2013, when it surveyed nearly 400 credit unions and banks.

Since then, it has risen to 128 following the latest survey of more than 300 financial institutions in August.

Other results of the indicator include:

  • Overall concern about ability to manage risk has grown, and 44% cite regulatory pressures as the main obstacle;

  • Ongoing challenges with compliance for changing regulations concerned 72% of respondents;

  • Concern over the CFPB's new Home Mortgage Disclosure Act reporting requirements have risen to 63% from 45%; and

  • One in 3 respondents indicated they have hired staff or transferred staff from revenue-generating roles to help manage increased risk and compliance requirements in the past 12 months.

Use the resource links below to access the results of both surveys.

Mortgage Lender Sentiment Survey (PDF)

Regulatory and Risk Management Indicator