By: Andrew Duncan, senior vice president, mortgage technology & compliance
Generally speaking, the purpose of compliance is to help an organization manage risk. That’s especially important for smaller institutions like credit unions that are laser-focused on member service. Effectively navigating risk enables credit unions to protect their interests and, ultimately, continue to serve their members well.
For many credit unions, the most manageable way to address compliance is by placing someone in the role of understanding and enforcing it. But, as an organization grows, a single compliance professional is not enough.
WHAT YOU NEED TO KNOW
The world of regulation and compliance shifts quickly and frequently. Changes in government administration, the economy, and other areas of the market often impact compliance priorities.
From the Obama administration, then to Trump, and now Biden, there have been significant adjustments in specific compliance requirements. We’re currently in a period of transition. When that happens, we often see rules and their interpretations fluctuate.
For example, changes to the Qualified Mortgage Rule were finalized In the final days of the Trump administration. It’s likely that the Rule will get rewritten once the Senate confirms President Biden’s new CFPB Director.
COVID-19 is still stretching the paradigm of federal rulemaking, especially when it comes to private mortgages. We expect further clarification as the year progresses. Regardless, changes have arrived in the landscape of privately-held portfolio loans at state-chartered credit unions.
WHAT CAN YOU DO TO PREPARE?
The information made available by the CFPB’s Acting Director is clear. Credit unions need to focus on fair lending.
If your organization hasn’t started preparing, it is time to start. As an industry, it is time to focus on the tools and technology credit unions use to evaluate their fair lending compliance.
There are many ways to define what fair lending means. At the end of the day, it’s making sure we’re continuing to treat members in a uniform manner without bias. Credit unions should be using their resources to address and resolve issues quickly. You want to be the one to identify problems – not your regulator or a private litigant.
IMPROVING YOUR COMPLIANCE
The old mindset of “checklist compliance” is not going to cut it in today’s complex financial landscape. Credit unions should be prepared to invest resources in effective compliance practices. The compliance team should have authority within the organization to help effect change and contribute to the conversation.
Compliance professionals should be at the decision-making table. If the compliance officer isn’t there, an ideal outcome is unlikely. It’s difficult and sometimes impossible to ensure compliance from a distance.
CAN A CUSO HELP WITH COMPLIANCE?
For most credit unions, a CUSO is an ideal partner for services and functions that require capital outlays and additional work force. That’s why many credit unions engage a CUSO to supplement or provide their mortgage services. Since mortgage lending is one of the most robust and complex areas of compliance, CUSOs are valuable partners who can navigate regulatory requirements with and for you.
It’s helpful if you think of managing compliance as a means to serving your members. It is easy to consider it a “back-house” operation, but the truth is, downplaying compliance does a disservice to your members.
Based on previous administrations and current conditions, compliance will likely increasingly be enforced by penalty. Those fines will no doubt trickle down to members in subtle ways. With a CUSO in your corner, your credit union can successfully master the ever-changing world of compliance.
Aligning the purpose of compliance with the overall mission to serve members makes applying the necessary resources more worthwhile. TruHome can help you prepare for the challenges that lie ahead so that you can continue to serve your members like no one else can. To learn more, click here. Or to listen to a recent podcast on the topic, click here.