By Pramod Karachur
on August 11, 2016
Lenders and servicers have used technology to gain the competitive advantage, attract tech-savvy millennials and enjoy efficiency in their loan origination and servicing activities. When it comes to compliance, however, lenders and servicers have come up short in successfully adopting technology.
After Dodd Frank Act in 2010, the rules have changed and the Consumer Financial Protection Bureau (CFPB) has played an important role in enforcing the compliance on the lenders and servicers. Other regulatory bodies such as Office of the Comptroller of the Currency (OCC), Federal Reserve (Fed) etc., have also enforced additional requirements. We have all seen what the result is when there is a failure to meet these regulatory requirements: For example, in May 2014 Bank of America was required to pay $30 million to improve its compliance practices thanks to findings by the OCC.
A report by CFPB published just last month (June 2016) stresses that lenders and servicers are not effectively investing in technology. And the whole purpose of having this high level of compliance is not helping the borrowers instead it can lead to greater risks. While leaders and servicers should be maximizing technology to aid in compliance efforts, they are only using the basic applications, such as spreadsheets, to manage compliance. Yes, I have actually had people tell me they use and are happy with their run of the mill spreadsheets. Using these applications might solve work for the short term but for the long term, this approach will present more challenges than gains. The mindset of using basic applications until there is an issue or until an agency cites you is misguided and financially risky; however, this is the pervasive thinking in many companies.