As the CFPB prepares to enforce new regulations on mortgage loans, credit unions should utilize analytics to ensure compliance and gain a competitive advantage with their data.
Mortgage loans form the longest lasting bond between a credit union and its members. Most members “lock-in” for a 30 year relationship with their credit union through a mortgage. A 30-year product lifecycle is a remarkable opportunity by any industry’s standards. However, mortgage lending is being held under scrutiny by the U.S. federal government. With unethical mortgage lending cited as one of the factors that caused the Great Recession, the Consumer Financial Protection Bureau (CFPB) was created to place more regulations on financial institutions to avoid another financial crisis. Regulations mean more detailed reporting. With new CFPB rules on mortgages going into effect October 3rd, credit unions are scrambling to adjust their systems to accommodate new data requirements. By utilizing a data warehouse and analytics, credit unions will be able to go from maintaining compliance to developing a core competency in mortgage analytics.
New CFPB Rules
The CFPB has been authorized to integrate the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) required disclosures to borrowers. This has become known as TILA-RESPA Integrated Disclosure (TRID). Communication between a mortgage lender and borrowers is essential. Many times, borrowers are not clear about the obligations they are signing up for. The new disclosure rules have been implemented to form a stronger communication channel between lenders and borrowers. Credit unions were already strong advocates for clear communication before the CFPB initiated new regulations. However, the reliance on software has begun to make regulations system-focused instead of member-focused.
Analytic Data Model
Changing regulations require software changes in the age of technology-assisted financial operations. Many IT resources have been taken “offline” by the workload required to prepare for the CFPB regulations. As regulations continue to become more data-driven, credit unions must invest in data management tools to prepare for shifting regulations. Regulatory reporting requires accurate data built on an analytic data model (ADM) to bring credit unions into compliance. Designing a data model to accommodate regulatory needs has become a necessity for credit unions looking to stay off the CPFB’s (and other regulators) radar.
Scalable Data Warehouse
Most credit unions are well underway with projects to meet the deadline for the CFPB mortgage rules. However, it has caused many headaches for everyone involved in the mortgage loan processes. As rules continue to shift, data requirements will become more challenging. Data warehouses must be designed to accommodate these changes. A data warehouse must be scalable to accommodate shifting data needs. The ability to add new data into the data warehouse (from source systems that are continually being updated) is essential to develop an analytics strategy to meet new regulations. Accommodating regulatory shifts will be made easier with a scalable data warehouse. As data continues to shift and grow, credit unions will be able to adjust their data warehouse accordingly.
Building analytics to stay compliant with every regulation is essential for the health of all credit unions. As the world continues to become more interconnected through mobile and online channels, regulations will become more dynamic. Credit unions that do not invest in data management tools (i.e. -data warehouse) and a robust analytics program will eventually be swallowed up by a tidal wave of dynamic regulations.