State Examinations - AML/BSA Compliance - Self-Audit Checklist to Ensure Compliance

We know that state examiners focus on a number of specific issues. A recent spate of calls reveals that New York, Indiana, Texas and Pennsylvania have questionnaires and examiners that ask pointed questions about the AML/BSA compliance program for mortgage originators.  To ensure that you are hitting all of the requirements we have compiled a self-audit checklist for you to use to evaluate and collect data.  You should run through this checklist annually.

Use the BSA/AML Self-Audit Checklist for mortgage originators, to ensure you keep all of the information needed for an examination.  Members may download the original form for customization from http://www.mortgagepolicymanual.com/updates-and-downloads.html or mortgagemanuals.com/updatesanddownloads.htm

Compliance Officer Training

New York's examination findings sometimes cite a recommendation for the compliance officer to have training.  The FinCEN rule requires training, but does not say that it must come from a certified 3rd party.  FinCEN offers training on its website, and many compliance providers provide training for a fee. Familiarity with the rule - actually reading your policy - also counts as training.

Quality Control and AML

We do not recommend that firms maintain a separate Anti-Money Laundering Plan, but rather that they integrate the AML process with their Quality Control function.  After all, FinCEN wrote the AML rule as a fraud detection/reporting requirement, and that is exactly what the quality control plan should do.  As a consequence, make sure your quality control plan has a robust red flag feature.

Register for the Portal

Your plan loses credibility if your compliance officer isn't even registered with the FinCEN portal.  It implies that you have no intention of participating in the program.  This simple fix will eliminate many citations.

Urban Institute Info Graphic - Backsliding on Equal Housing Opportunity

New Info Graphic Paints a Sad Picture of How Far Lending to Under-Served has Fallen

The Urban Institute's Housing Finance Policy Institute launched a year ago with a commitment to bringing unbiased and factual information to the housing debate. This most recent release shows the progress made in understanding what is actually happening in markets today. This info-graphic is a stunning story of America's housing finance system's failure to serve minorities.

Visit the Urban Institute's Info Graphic to drill down 

According to the data, this may represent one of the contributing factors to the sluggish housing recovery.  Taking 13% of the market out of the equation could have that effect.

Interestingly, FHFA just announced the proposed affordable housing goals for Fannie Mae and Freddie Mac. Aside from the fact that these "affordable housing" goals provide a politically correct subtext for lending to minorities, these goals do not increase current objectives substantially, except for targeting low income areas instead of individuals.

A 3% annual increase in Low Income purchases goals is not going to replace
the 13% of the population excluded since the crash. Source Federal Housing Finance Agency

For those involved in primary origination, perhaps this is the signal to develop business models that focus on minority markets. Failure, on the part of the industry, to provide a private sector solution to this problem in today's environment of regulated compensation and higher priced mortgage lending restrictions would acknowledge the real problem; today's regulatory scheme deprives a large segment of the population of access to home ownership.

This data show continued regulatory insistence on consumer protection by stifling private enterprise will ultimately hurt all Americans by creating wealth inequality, and depressing markets broadly.

Citations

Bai, B. & George, T. A new view of the housing boom and bust. (2014, September 10). Retrieved September 18, 2014, from http://datatools.urban.org/Features/mortgages-by-race/#5/39.809/-94.812

Russell, C., & Johnson, S. (2014, August 29). Affordable Housing Goals for 2015-2017. Retrieved September 18, 2014, from http://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Proposes-2015-2017-Housing-Goals-for-Fannie-Mae-and-Freddie-Mac.aspx

LinkedIn Vulnerability - Group Posting Can Lead to Blocking

If you count on person-to-person networking through LinkedIn Groups, you should consider having a back up plan.  LinkedIn initiated a new protocol this spring where any member can flag any posts to group discussions as spam, which then blocks your posting in ALL of your groups.  This can have an adverse impact on your marketing efforts, as well as your distribution of information such as product bulletins to groups and individuals who have joined LinkedIn for this very purpose.

One of the beautiful aspects of LinkedIn includes the ability to identify people within your vertical market and initiate or join conversations with peers.  No other networking opportunity (with the exception of corporate blogs within an organization) gives you exposure to an engaged audience within your industry.

The problem arises when a competitor or other individual with an axe to grind decides to flag any post as irrelevant or promotional.  LinkedIn makes this easy to do by simply pulling down the carat on the upper right hand side of any post.  Once one post gets flagged, you instantly go into moderation status ACROSS ALL GROUPS, meaning your bulletins, comments, discussions and other contributions immediately go to a queue for manager approval instead of being posted.  This means that your response to a discussion won't post until approved sometimes days or weeks (or NEVER) after you write it, meaning your contributions become irrelevant and you miss participating in industry conversations.

LinkedIn support refutes this citing that group managers can override all moderations. That's LinkedIn's position regarding why they won't change this new approach. But you may find that many groups have a "self-policing" policy where the manager takes a "hands-off" approach. This means your contributions go into a black hole.  A bitter pill, if LinkedIn is an important part of your marketing.

Some alternatives, if you have been blocked - as I have been - might include:

• Linking to your content in Pulse by following the instructions on LinkedIn's site
• Use Issuu.com to create a print version of your content, and promote that link on your website and blog
• Duplicate your content into powerpoints, and use SlideShare and promote that link on your website and blog

Of course LinkedIn designed this innovation to combat spammers. We all hate spammers. However, most people see spam and immediately recognize it. Those spammers get banned. When the spammer realizes he or she has been banned he simply creates a new avatar for himself and starts anew.  These are not people who have actively participated in LinkedIn earnestly and honestly for years building large networks of people.  It TAKES YEARS to add 500 people to your network. A spammer has a small network and a new profile. A spammer doesn't get top contributor status. WHY, then, is LinkedIn seemingly eliminating the utility it has created? For LinkedIn this represents a sad development. The company spent years making itself relevant using groups as a way for people to connect. This new protocol means that era is over.  

The good news is that you can now ban your competitors from posting!

Meet the New Boss - CFPB Mortgage Chief has only Limited Direct Mortgage Experience

Meet Patricia McClung, the new
mortgage chief at the CFPB.

According to an article first appearing in Politico, the Consumer Financial Protection Bureau has appointed Patricia McClung as the new mortgage enforcement chief.  What do we know about her industry experience?

According to her LinkedIn profile, she has 14 months experience as a Senior Policy Adviser at HUD "working in the Single Family FHA front office and partnering with the entire SF organization to work on transforming the business to meet the needs of this challenging housing market and prepare FHA for the needs of the evolving housing market of the future."...

Before that she was a VP of Marketing in charge of marketing the NAR's AVM model.

Before that she worked at Freddie Mac as a VP Product Development/Marketing for 23 years until 2011 and boasts "expertise in leading large scale business/technology projects, product marketing, training and education."  She was involved in customer management at FHLMC and was at the forefront of announcing Freddie's decision to stop buying subprime loans after the housing crisis was well under way. She was also involved in FHLMC technology initiatives such the Uniform Mortgage Data Program (UMDP).

She has been lauded as a workplace diversity champion, according to an article in Diversity Best Practices.  One must applaud her work in advancing women in housing finance.

According to Fairfax County land records, her husband purchased the land their home is on in 1995, so likely has been through the home mortgage process a few times herself. But beyond this, it's hard to see how much direct mortgage industry experience Ms. McClung has.  She seems to have a positive and upbeat personality, and experience with managing issues tangentially related to the industry, and from a very high level, but nothing in the way of an understanding of the intricacies of the business at the consumer level.

My concern is that much of the enforcement and rule-making that has been levied on the industry has come from people, albeit well-meaning, with only peripheral knowledge of the business - what you can garner from first time home buyer websites, federal reserve publications, and real estate articles. Given the punitive and heavy handed approach of the agency with it's "fine first, ask questions later approach", shouldn't we have had some input into our own regulator?

Bulletin: CFPB Does Not Want Table Funders Masquerading as Correspondents

The CFPB has provided the guidance it will use in determining whether correspondents are table-funders or conducting bona-fide secondary marketing transactions:

Does the correspondent have:

• the net worth to be a warehouse banker
• underwriting staff
• multiple investors to sell closed loans to
• arrangements where it brokers but also funds with an investor/wholesaler
• multiple lines of credit
• the ability to sell loans to whomever it chooses vs. captive line
• understanding of compliance risks associated with funding
• rigorous approval by warehouse lender

Basically, are you really a lender, or are you a glorified table-funder?  The CFPB guidelines for determining this have been tempered with the idea that a company may be transitioning to correspondent, but that this may not be an artifice for circumventing Dodd-Frank rules re: compensation, disclosure.

http://files.consumerfinance.gov/f/201407_cfpb_guidance_mini-correspondent-lenders.pdf

Not to Say "We Told You So" But...

Link to LinkedIn Discussion Regarding this