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Regulatory Changes Affect More Than Just Compliance

The regulatory changes that will occur over the next 18 months, particularly on the loan side of the financial institution, will be massive. The changes that are coming are the most extensive that I can remember compressed into such a short time frame; and while my memory is fading, it is still pretty good; and I have been around quite a while. The changes put a huge burden on an institution’s compliance officer, but there are a lot of other departments and functions that will also be dramatically affected. It is an obligation of the compliance officer to make sure that everyone in the institution and the organizations that support it that will be impacted know what is coming.

If you have not made the management of your institution aware of all of the regulatory changes that are in the pipeline, you need to do so as quickly as possible because those changes may affect a lot of things. They can affect the parameters of the products that you will offer in the future, certainly your loan operations, potentially staffing levels and a host of other things. For example, the proposed change in the compensation rules for mortgage loan officers potentially gives your institution more flexibility in paying bonuses to those persons and, therefore, more flexibility in designing their compensation packages. The zero/zero mortgage loan requirement, whereby an institution that charges either points or fees on its residential mortgage loans, will have to offer a no-point, no-fee alternative that could have a huge impact on the parameters of your residential mortgage loan products. The requirement for early intervention in delinquent mortgage loans and new requirements to respond to requests for information on mortgage loans will be something new for your mortgage servicing personnel, and they need a heads-up about what is coming. If you are a HMDA or CRA reporting institution, make sure that your loan origination personnel know that they will have to gather additional information about their residential mortgage loan applicants and about their small business borrowers in the future.

While the proposed regulatory changes may get tweaked a little bit, in all likelihood, they will be implemented pretty much as proposed. Review all of the proposed changes and analyze which departments of the institution will be impacted and make sure that those impacted departments understand what is coming so that they can make their plans. Also, make sure that the other departments in the institution put sufficient time on their education calendars for the education of their personnel on the new requirements as they come about.

Additionally, it is budget time. If you are preparing the compliance budget for next year, don’t just add the largest percent you think you can get by with to this year’s budget. Think through what you will need carefully and, then, fight to get the resources that you require. First, the persons responsible for compliance will need significant educational opportunities for themselves, whether seminars, webinars or otherwise. You will have to write new or update existing policies and procedures. Next, you will have the expense of educating the other affected employees of your institution on their new responsibilities. Finally, you will have to make sure that audit programs are in place to assure that you are doing things correctly.

If your financial institution does not subscribe to a compliance service, I strongly suggest that you do. This next year, a trusted compliance advisor will be worth its weight in gold. Egotistically speaking, I think our TriComply service is the best, but there are other good ones. Check us all out and make your selection.

Finally, review which of the changes affect the automation that your institution utilizes and obtain a confirmation from your automation providers as to which changes they will support, and which they will not. Will the system that services your mortgage loans provide for the upcoming required periodic statements? Will they provide the new ARM interest rate adjustment notices? There are four new suggested forms for the force placement of flood insurance and five suggested forms for the early intervention in delinquent loans. Will your systems produce those forms, or will your institution have to produce them manually? Will your system have the capability of seamlessly servicing requests from your mortgage loan customers as the new servicing rules require?

The proposed new rules require a lot of analysis from an operations perspective relative to how the changes will be implemented. The sooner that analysis is begun, the less painful the changes will be. Also, don’t get caught in the “Nobody told me” trap when other departments claim that they cannot implement the new rules quickly enough because they did not know that they were coming. Finally, if you are a TriComply customer and we can assist you with the analysis or any other aspect of the new regulatory changes, please call on us. Give us the opportunity to serve you.

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The above article was provided to Andrews Hooper Pavlik PLC (AHP) courtesy of TriComply, the compliance arm of TriNovus. AHP does not guarantee accuracy of the information provided in the article and it should not be construed as professional advice. If you have any questions regarding this article, please contact Randy Morse, CPA, partner and leader of AHP’s Financial Institution practice. AHP provides a broad range of accounting, auditing, tax, and consulting services to financial institutions throughout the state of Michigan and beyond.

TriComply compliance service offer banks a full compliance package that provides them with quality assistance at an affordable price. TriComply provides the TriComply knowledgebase, compliance manual, policy manual (written and reviewed), compliance newsletter (weekly), advertisement review, compliance calendar, helpful resources and an online training library of compliance webinars.

The CFPB now has control over certain consumer protection laws. As a result, TriComply has put out a product called CFPB Comparisons: What Really Changed. This produce allows you to see the changes firsthand versus going line by line on your own. Thus saving you hours of stress, anxiety and work. Please contact Starr Largin at 205.588.4316 or or Darryl Brasfield at to receive information regarding TriComply or to schedule a demo.