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In the new regulatory environment, the Consumer Financial Protection Bureau (CFPB) expects mortgage lenders and third-party settlement service providers to offer consumers access to fair, transparent and competitive financial products and services.
In this white paper, we discuss the operational changes that mortgage lenders must consider if they hope to balance the need to comply with the government’s consumer protection regulations as well as the business imperative for profit. These changes include:
With a regulatory mandate to improve customer service, firms in the financial services industry will be working to meet this goal in various ways. No firm will achieve success without changing their processes. Those that do this while opening themselves up the least to compliance errors will be most successful.
Read more about The New Customer-Centric Mortgage Industry Series
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Under the new regulatory scheme, the Consumer Financial Protection Bureau (CFPB) puts mortgage lenders and third-party settlement service providers on notice: Compliance will be judged by the extent to which providers offer consumers access to fair, transparent and competitive financial products and services. Today, it’s the consumer the government is out to protect, not the institution it regulates.
As the mortgage industry moves into this new era of consumer protection, executives face a new question: How are fairness, transparency and competitiveness to be measured? For many lenders and their vendors, customer satisfaction has been a standard reporting and compliance measure. But is this old standard sufficient now that the regulatory pendulum has swung away from business as usual?
What is the best strategy for an institution to embrace in order to put it in good stead with the new regulator as the new rules come online? Since much of the “letter of the law,” or the rules, have yet to be written, lenders will be best served by focusing on the “spirit of the law.” This requires us to carefully examine our processes and their ultimate impact on the consumer experience.
We recommend three process changes that institutions should consider at once to prepare for more stringent regulatory oversight. These changes include:
Establishing a separate budget for customer relationship management (CRM). Until the historic refinance boom, mortgage loan borrowers came back to the closing table only once every 7 years or so. There was no CRM software available that could nurture a lead for that long, and so in most cases, these leads were never tracked. While this may have been acceptable when there were no lasting, serious side effects of a dissatisfied borrower, it will not suffice in the post Dodd-Frank era. Lenders would do well to begin now by establishing a real CRM budget and making an executive within the institution accountable for spending that budget responsibly.
Establishing the monitoring of the CFPB’s complaint database. With dissatisfied borrowers in mind, it has also become critical for institutions to monitor the CFPB’s complaint database. In the case where a complaint is lodged against the bank, steps should be taken at once to ensure and document that the fault, if there is one, is a unique circumstance and not a pattern of behavior.
Enabling customer self-service. In terms of enabling customer self-service, banks will need to consider not only the technology to be used, but also what information can be accessed, by whom and under what conditions—and not just from a risk perspective, but also in regard to customer satisfaction.
Both the letter and the spirit of the new Dodd-Frank legislation and the rules the CFPB is writing to define them are centered squarely on consumer protection. As the final wording of major rules are finalized and amended, the industry’s best chance of staying compliant is to begin thinking in terms of improving the borrower experience. For now, at least, protecting the consumer is being treated as a synonym for pleasing the consumer. Customer satisfaction has become the metric by which the regulator measures fairness and transparency.
Improving customer service in our industry is a regulatory mandate and firms will be working to meet this goal in various ways. No firm will achieve success without changing their processes. Those that do this while opening themselves up the least to compliance errors will be most successful.
January 27, 2014
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