ACUMA ONpoint
ACUMA ONpoint
Breaking Down Mortgage Compliance
The compliance landscape for credit union mortgage operations has never been more complex or critical to navigate successfully. In this eye-opening first episode of our Compliance Summer Mini Series, regulatory expert Michael Christians is joined by ACUMA President Peter Benjamin, warning against developing a false sense of security in today's shifting environment.
While federal regulators may be stepping back from aggressive enforcement, Michael reveals why this doesn't mean credit unions can relax their compliance vigilance. Instead, he explains how State Regulators and Attorney Generals are poised to fill the enforcement void, maintaining pressure on credit unions to uphold strict standards in fair lending, UDAP compliance, and mortgage servicing.
Through practical examples and clear explanations, Michael guides listeners through the most pressing compliance challenges facing credit unions today. He explains how fair lending enforcement is evolving under the current administration, why UDAP can touch virtually every corner of mortgage operations, and how seemingly simple oversights like failing to terminate PMI on time can create significant consumer harm and regulatory risk.
Tune in now as Michael uses his expertise to translate complex regulatory concepts into actionable insights, making this episode particularly valuable.
Sponsored by Consolidated Analytics
The views and opinions expressed in this podcast do not necessarily reflect the views or positions of Acuma, its board of directors, its management staff or its members. The podcast discussion presented is conversational in nature and for general information only.
Speaker 3:Hello and welcome to Active Zone Point Podcast, a series focused on sharing the stories of people who are making a positive impact in the credit union mortgage industry. I'm your host, Peter Benjamin. Before we get to our episode, just a quick word from our sponsor.
Speaker 4:This episode is brought to you by Consolidated Analytics, helping credit unions make smarter mortgage decisions, from origination to servicing and beyond. With expert valuation, risk management and compliance solutions, they provide the insights you need to protect your members and grow your portfolio with confidence. Whether it's due diligence or collateral risk assessment, they help you navigate the market with ease. Learn more at ConsolidatedAnalyticscom.
Speaker 3:Welcome to the first episode of our Compliance Summer Miniseries, where each episode will feature an intimate conversation with people who I consider to be experts in their field and supporters of the credit union movement. It's our goal with these episodes to take a deep dive into various compliance topics that are impacting and reshaping the credit union mortgage industry. Our first guest in the compliance miniseries is our friend, michael Christians. Regulatory Compliance Counsel with Michael Christians Consulting LLC. Michael, my friend, how are you doing today? Peter?
Speaker 5:I'm doing well. It's great to be with you. Thank you for the invitation and, yeah, I imagine we've got some things to talk about, don't we?
Speaker 3:I mean one. It's never boring with you. It's compliance. Compliance is a broad topic topic and it overlaps with a lot of different things. You could easily say compliance, you could say policy, you could say regulations, all of the above. They're like triplets running down the street holding hands. So it really is this massive topic. It's one of my favorite things to discuss because it's this weird anomaly of a thing that no one ever seems to get right. You know, as funny as it sounds, you and I could read something you know 10 times and interpret it completely differently. Yep, and that's all it is.
Speaker 5:It's all up for interpretation and, and to that point um, both of our interpretations, although completely different, are probably accurate to some extent right, that's exactly it.
Speaker 3:That's exactly. And the funny thing is is that when they write these rules, they purposely leave, like these gray areas, sure, and so that's why we're doing this. You know, the summer miniseries specifically focus on compliance with the hopes that we shed some light on the gray areas. Now, before we get to the meat and potatoes, like we always do, got to bring Justin in. Justin the hawk, the screech sound just went off. I'm not gonna do it again. But, justin, how are you doing today? And please tell us what is the latest and greatest happening over at acuma?
Speaker 2:I'm good, peter. How are you living? The dream man, that's good. I'm glad that you also didn't try to make that hawk sound again that was did it once and I'm never, ever, ever going to do it again.
Speaker 2:Yeah, I mean, you just got to go with the caca. That's the call of the day at that point. You're not cool enough. That's what it is. You don't have the namesake to be able to do it, that's okay.
Speaker 2:Anyways, we just got back from Seattle last week. That was super exciting. It was great to see all of our members engaging and interacting with each other. That rounded out our focal point workshops. So if you missed them, you missed some great events. That's all I'm going to say. They were good, they were fantastic.
Speaker 2:So up next, for in-person, we have our Make your Mark annual conference, which will be coming up September 21st to 24th. That's going to be in Denver, colorado. Registration is still open so you can head over to the Acuna website and come make your mark with us. And then, if you're looking for additional opportunities outside of our in-person events, we have our numerous networks. Yesterday was our Q2 underwriting network meeting, so if you were able to attend that, then you already know how amazing that session was.
Speaker 2:But our marketing networks, young professional networks, volume-based networks and then again our underwriting network have quarterly meetings coming up in the next few months. So just pay attention to the Acuma site and social feeds as those events get announced. Boy, do we have a lot going on? We sure do Just a little bit, but it's fun, it's exciting. I think that watching these networks especially grow I mean, our volume base for Q2 is just amazing. To see the amount of discussion that happens in these virtual meetings is nothing short of amazing, because we get to see it on site. We get to see them all light up and come to life, but now we're getting to offer that to them on a quarterly basis as well. Yep, couldn't agree more. I appreciate you. Yes, sir, thank you.
Speaker 3:Thank you. All right, michael. On to you. Yes, sir, thank you. Thank you, all right, michael. On to you. Now, again, we want to focus on compliance, but I have to stay to the heart of this podcast. So first things first. The same boilerplate, boilerplate question. I always ask everybody you know the reason for why we are here. You know who is Michael Christians, so that's always going to be the first question. So first things here. Who is Michael Christians? So that's always going to be the first question. So first things first. Who is Michael Christians?
Speaker 3:As I mentioned in my long-winded intro, you are a massive supporter of the Credit Union movement. You're an expert in your field, but a lot of people don't know you, which is shocking. They may not know you. You are a regular at our events. You spoke at our workshops. You're going to be speaking at our annual conference. You've spoken at tons of our webinars. You've written articles for the pipeline. You're going to write more articles for the pipeline. You are the brains behind our Acuma compliance insights. So for those of you who have not seen your name or last name pop up somewhere in dealing with Acuma because they're not just paying attention who is Michael Christians?
Speaker 5:Well, and it's maybe not that they don't know who I am, but they just don't want to know who I am. Right, but no. So you know, I've been, I've been doing this a while. Um, I've been in the financial services space, uh, for, you know, over 20 years. I got into the compliance specific gig, um, you know, just briefly, uh, before I got, went back to law school back in, uh, 2010, 2011,.
Speaker 5:Came out of there and really kind of landed in the credit union movement and have stayed there and, uh, you know, been working with Acuma for a number of years, do a lot in the mortgage lending space. You know, over time, you know what, what your team is doing Peter, you know, justin, krista, uh, the gang, um, it's, it's phenomenal. The workshops that you put together, the annual event, um, you know, there's just this is a great, great uh resource for credit unions in the mortgage lending space, which, you know, when we talk about compliance, that's what it's all about. Right, no one can be a 100% expert on this. You got to lean on your friends and so we're all in this together and I'm happy to play my part.
Speaker 3:No well, I appreciate the kind words. You know, it's like you said, we're all in this together and I'm happy to play my part. No well, I appreciate the kind words. You know, it's like you said, we're all in this together, and so that's why we, you know, go out and we find people like you, because we need people like you, who are the best and brightest in our industry to kind of educate our members, and brightest in our industry to kind of educate our members, because when you look at the average credit union, the average credit union doesn't have the resources to have this internal knowledge. I mean, I was there and it was always a head scratcher, right? So how do we navigate these trying times? And I think that's a perfect segue to, you know, the main reason why we're here.
Speaker 3:So I'm a frame up the the miniseries as briefly as I possibly can, more so than I did in my intro. So each episode is going to be focused on a specific topic that's impacting our members, right, and I'm not going to give our listeners anything more than that. But with the exception to your episode, your episode, more so, is going to focus on a general overview of all topics that are impacting them, because we felt it important to kind of start off with a list, a list of every important compliance topic. Now, it's safe to say that throughout the miniseries, that one or more of these items will be discussed by every other single, every single one of the other experts that we have, but because there's so many other, so because there's so many topics going on, we were going to betray our listeners by not addressing one or multiple ones at some point.
Speaker 3:So so, michael, here we go. We're going to start off with just a list of items that our members really should be focused on. Now, in many ways, you do this for us all the time, like you come to our events and you kind of just hit it from the top down these are the things you need to pay attention to. So let's start from the top. What if you had to say this is my number one thing, number one, compliance hit list. What is that number one thing that our members really need to start paying attention to?
Speaker 5:Yeah, so I think what we need to focus on is not having a false sense of security in this time where, yes, we are seeing federal regulatory agencies, whether that be the CFPB, the NCUA, etc. Taking a significant backseat, comparatively speaking to where. Don't have that false sense of security. Just because there's not a tremendous amount of new regulation coming out right now doesn't mean that there's not a lot still going on. And you know, I think we're going to spend some time talking about, just generally, what we're doing right now is seeing us unwind a lot of what we've done over the past few years. This is a very important time for us as an industry to reset and say, okay, the way we have done things is maybe not necessarily the way we're going to do things over the course of the next few years.
Speaker 3:So okay, so let's set these individual topics now. Okay, so when we look at these individual topics and I topics, you talk to a lot of credit unions. Whether it's at events or whether they're clients of yours, it doesn't really matter. When you look for areas of opportunity for credit unions and things that credit unions tend to have, we'll say the largest blind spots to what are they in your opinion?
Speaker 5:Well, you know, of course, I don't know that there's any discussion that we can have about compliance where we're not going to at least mention fair lending.
Speaker 3:I think that's fair. That's a fair statement.
Speaker 5:You know, from a fair statement by the previous CFPB administration, we're seeing a completely different engagement when it comes to redlining, where they're going to focus more on specific evidence of actual consumer harm versus maybe basing a redlining action on perceived harm. You know there's also, when we think about fair lending, we think about three different forms of discrimination, one of which is known as disparate impact, and disparate impact is a theory that says impact. And disparate impact is a theory that says, look, the credit union has a policy or a practice from a lending perspective that it applies uniformly across the board, but, for whatever reason, that policy ends up having a discriminatory effect. It's been a recognized form of discrimination for a long time. We have an executive order from the president now that says we're basically to continue to stay in tune with it but realize that the way the previous administration looked at fair lending is completely different than what we're faced with now.
Speaker 3:Okay, what we're faced with now. Okay, I mean especially with credit unions. Credit unions have been in the news a lot recently with redlining. Right, I don't think it's going to go away with this new administration and it's still safe to say new administration it's not going to go away with the new CAPB, regardless of the fact that McKern out stepped back about a month ago. Um, it's we. It's still the forefront and especially with, you know, a target very much still on the credit unions, back for our lending practices. And when I say that I'm really focused on, you know, bank lobbyists, you know how we go about lending is extremely important. Right, we have to show that we are going out and lending to low to moderate incomes and not discriminating against, you know, people. Ie redlining, right, I mean that up a good point.
Speaker 5:It's redlining or fair lending let me say it that way Fair lending still going to be a hot topic, still going to be a risk. It's just how it's going to be looked at is different, and I think during your compliance mini-series here, you're going to have a discussion about the Home Mortgage Disclosure Act, and I think that's monumentally important, because what the Home Mortgage Disclosure Act and I think that's monumentally important because what the Home Mortgage Disclosure Act does is it provides you with the data that indicates whether you're reaching out to those areas that you just talked about, and so credit unions are going to have to focus in on that data and do some self-assessment, if you will, because now we know definitively that it's that data that's going to generate how large that target is on us, right?
Speaker 3:100%, yep, 100%, yep, right. So I mean, and that's the you know, you know we, we talked about it. You know we didn't talk about so much on on this podcast, but we've talked about in the past. You know, although there's, you know, fair lending there, there's, there's, you know, redlining, and you know there's ecoa, you know, all too often you, you have these rules, regulations, acts, they all hold hands together, they all overlap and there's a reason for that. You know, they all, in many ways, are built for, you know, to prevent anti-predatory lending practices in some way, shape or form. Right, you know, and it doesn't just stop there. Right, we have to focus on doing the right thing at any given time, and now more than ever, with the data that is out there. If you don't understand these rules, regulations, do you name it? Someone else does better than you. So, going back to your point, leveraging that data is vital in this day and age.
Speaker 5:You know and let's stay on the topic of fairness here for just a minute, because I think that's a good way to say it you know, when we obviously fair lending is, of course, about fairness, but let's talk a little bit about, you know, things that maybe were, excuse me, considered by the previous administration to be unfair, deceptive.
Speaker 3:You're talking about UDEP.
Speaker 5:UDEP. That's exactly right, and I think we're going to see a change there too. You know, we've seen the CFPB came out. Oh, I don't know. The CFPB came out, oh, I don't know. Just, I think it was published within theicing space related to, say, cancellation of private mortgage insurance or loss mitigation options or pay-to-pay fees. Whatever the case may be, I think we still have to be aware of that element of unfairness, because, even though maybe the CFPB and CUA you know, once all of that shakes out, maybe they're going to take a backseat, I think what we have to be very aware of is that somebody's going to probably step up and fill that void, and you know what that's going to be. That's going to be your state regulators, that's going to be your state regulators, that's going to be your state attorneys general. It's still out there. You need to understand it, you need to stay on top of it, because maybe the CFPB doesn't make it a priority, but somebody else probably will, right?
Speaker 3:And so sticking with UDAP. So I mean, obviously there's a lot of change with UDAP Right, with udap. So I mean obviously there's a lot of change with udap right and, and you know so udap, you know, obviously udap for a long period of time was something that was highly debated. You know the definition of udap, right, yeah, but, but udap can go towards a lending practice in general, right, what is considered unfair and what is considered deceptive. So it can really be both. If I understand it correctly, it can go anywhere from the type of loan you give someone to the pricing you give someone, to who gets what and versus another person gets what, correct. So it pretty much it almost covers the full spectrum of how and what and why we do stuff. Am I understanding that right? Like, as far as like, it's like a full, blanket statement for ecoa, fair lending and you name it like it, it's almost, it's, it's come almost like a blanket term yeah, yeah, I mean I.
Speaker 5:I think you're 100 correct on that, because there is not a corner of your credit union's mortgage lending operation that is not subject to this discussion about UDAP. It could include anything from how you advertise your mortgage products and services to the fair lending implications of you know. How are you evaluating your applicants? How are you making your origination decisions? How are you servicing the loan after it's on the books? How are you attempting to collect the debt is not, there's, there's, there's not a corner of the credit union that is immune from this scrutiny.
Speaker 3:When it comes to udep, you're 100 accurate, so, okay. So this may come off like a silly question, right? So let's say I'm gonna focus on marketing, right? So in marketing, you have the idea of the rate and disclosing it as an APR, right, gramm-leach, right, yep? But let's say, hypothetically speaking, when you get to the actual application process, someone doesn't qualify at that rate for whatever reason, right, yep? And let's say there's actually a real violation. Okay, does that fall underneath of, underneath, a violation of? And let's say that, hypothetically speaking, that was the APR quoted on the marketing material was not accurate. Does that? Is that a violation of Graham Leach, or is that a violation? Is that UDAB? Like, at what point does is, is it? Do all these things start overlapping? At what point in time does one trump another? I hate to use that terminology, but you get what I'm saying no, I do and and and I think it could be both.
Speaker 5:You know in all honesty, and and here here's the best way to look at udDEP We've got some very specific advertising requirements under Reg Z specific to mortgage loans. Now we could have a violation under Reg Z where we potentially disclosed an APR incorrectly. We didn't include an additional disclosure when there was a trigger term present, whatever the case may be, but surrounding all of that is this overarching concept of deceptiveness which is a component of UDAP. If your advertisement is deceptive to the point where a reasonable person could not be expected to understand, that's what you meant. That's an issue and I think we have to be very careful because you and I standing here talking about this, we can throw a lot of terms, we can throw a lot of words around that you and I and most of our listeners understand because they're terms of the trade, understand because they're terms of the trade. It's our business, we know what those terms mean. There's still 70, 75, 80% of the alphabet regulation side of a strictly true compliance violation to just this overarching concept of that's deceptive.
Speaker 3:And as a result of the deceptiveness, here's your potential for consumer harm. I know I'm sticking with you because I just find it fascinating. So does you build in the fact or have any leniency for technical error, like Trid does? Nope, nope.
Speaker 5:It does Really. It really doesn't, because if you look at it doesn't from a unfairness perspective, the interpretation of UDAP is that it doesn't necessarily have to be actual consumer harm. It can simply be the risk of consumer harm From a deceptiveness perspective. It doesn't have to be that a majority of the general public doesn't understand your advertisement or your disclosure. It's the reasonable person standard. And Peter, let me tell you the reasonable person standard in the eyes of the law that's not a very high bar to cross, right. It's certainly not.
Speaker 5:So, yeah, there's just there's not a lot of protection when it comes to UDAP, and so you know, I just again I want to go back to just because our federal regulators are maybe taking a step back. If there is potential consumer harm that still exists which there is when we're talking about unfairness and deceptiveness somebody's going to step up and somebody's going to carry that torch to protect the consumer. So don't think that we can go back to the wild, wild west because we can't.
Speaker 3:And it's going to be one of those states like New York, california, absolutely and or it could be one of those states like Alabama or Georgia they're the ones who have a long history of redlining ECOA enforcement. It's going to be one of those states, but I start with New York and California, because they pretty much have their own mini CBBs.
Speaker 5:That's right.
Speaker 3:But I guess we'll see. I mean, udap is fascinating. It just really is. You know we're approaching that time because these are meant to be quick hits. But if you could quickly summarize just some other ones real quick, other massive compliance topics that our members really need to, our members and listeners really need to hit on what, would they be Just real quick.
Speaker 5:Yeah, you know just a couple of real quick ones. I want to stay in the Equal Credit Opportunity Act space. Stay in the Equal Credit Opportunity Act space. I want to talk about adverse action requirements and making sure that we are clearly disclosing to applicants when we're not able to provide them the credit that they requested. We give them specific reasons as to why.
Speaker 5:I see a lot of credit unions that want to say well, you know, you didn't meet our minimum credit score requirement. Well, that doesn't help the consumer, right? The expectation is that the adverse action requirements exist to make sure that an applicant knows what do I have to do to put myself in a better position next time? And I think that's very important for credit unions, because that's really that's the business model that we're built on right. We are partners with our members, so pay attention to that. And the other thing would be mortgage servicing. Whether that be loss mitigation, early intervention, whatever the case may be, you've got to keep in mind that you have compliance responsibilities that continue after origination for the life of the loan.
Speaker 3:Okay, you know, I was looking at some of our notes, you know, just a second ago, and the funny thing is is that one of the things that kind of brings me me back to what you just said is is failing to terminate PMI on time, and the number of servicers that are not doing that Is amazing.
Speaker 5:It is. It's it's shocking because it's really. I mean, it's a relatively simple calculation and monitoring and it's just it's not happening. And you want to talk about consumer harm? Well, yeah, if I'm having to continue to pay private mortgage insurance premiums for an additional 18 months beyond what the law permits. Well, you know, it doesn't take a very strong argument in a court of law that there's been consumer harm there.
Speaker 3:And you know I won't name the servicer that he's with, but he's with a servicer and that servicer has a Zillow estimate on. You know, when you log in, if you log in, you have the Zillow estimate displayed. This is what your house is worth and of course you see what your current balance is. And just strictly based off of that, he was at like a 65 ltv and he's still a pmi. I was like he's like can I, can I drop this pma? I was like it should have automatically dropped off. Absolutely. I was like you've had this house for four years. It should have automatically dropped off. I was like like, call them, get it removed. So we did.
Speaker 5:Yeah, it's. I, I don't know, I mean, that's that? That's been one of those things that, um, it just doesn't seem to be getting a whole lot better. But you know, again, we, we do. In summary, yeah, it's a different, it's a it's a different regulatory environment today than it has been. There's no question about that. But don't take your eye off the ball.
Speaker 3:I agree. All right, we need to start transitioning, but before we do, as always, I ask the same exact last question, and it's the same first question, same last question. The same last question is you know what keeps you going, what keeps you motivated? You're very passionate about our industry. As many credit unions as you possibly can you know, understand compliance and regulations and a simple to as, as and as simply as they possibly can. But what keeps you going?
Speaker 5:yeah, I think it goes back to one of the very first things that you said. Um, you know credit unions, depending on their size, you don't have large departments to deal with this. You're lucky if you've got a compliance officer, and it really does take a village. Take a village. You need to be able to rely on peers, on experts in the field, to really kind of help you navigate a very complex environment. And I, you know, I love doing that, I love helping credit unions, I love being a resource. Um, you know, and and and that's why I uh am so actively involved, uh, with, with Acuma, because that's what we're trying to do, right, that's what all of us are trying to do is to help each other, um, navigated a very again complex, very complex topic perfect.
Speaker 3:Love it, man, love it all. Right, michael cypress. Transition to the second segment of our podcast, my favorite. Just like we did last year with our mini series, this year's, this summer's miniseries is going to be all focused on dad jokes. I know you came prepared, well prepared, so you came prepared before, but we're only going to do two, I'm sorry. So here's what we're going to do Michael, you're going to do two, the Hawk's going to do two and I'll wrap up with two. So, michael, when you are ready, please give us your two dad jokes.
Speaker 5:So you know, let me, let me just say this this is it's a very intimidating. It's a very intimidating to try and go up against you guys with dad jokes. So I'm going to do my best. No, no, no.
Speaker 3:Awesome. Why was the computer so cold with dad jokes. So I'm going to do my best, no, no, no, it's going to be awesome.
Speaker 5:Why was the computer so cold?
Speaker 3:Why.
Speaker 5:It left its windows open.
Speaker 3:I hate that. I knew that I hate that.
Speaker 5:Here's I'm going for pro care. This, I think, is my best one. We'll see what did the nuts say when it sneezed cashew, but you gotta put something into it. Cashew, cashew. But you gotta put something into it, you gotta, that's right. That's what I got, boys, that's what I got that was good.
Speaker 2:Which hand is better to write? With the right one? Neither it's better to write with a pen.
Speaker 5:I like that one.
Speaker 3:I love my like the ones I find that are not really like punchy jokes but like it's like for a while, for a while he had jokes that were all like my pen.
Speaker 2:Yeah, those are my favorite. Um, For a while he had jokes that were all like my pen. Yeah, sefty, those are my favorite. All right, so another one is how do cows stay up to date with current events? This one might have been done. The moose paper yeah, that's what I thought. That one, the moose paper yeah, that's what I thought.
Speaker 5:That one, your first one, that redeems you.
Speaker 2:I started strong, I finished strong.
Speaker 3:Sorry guys, my turn. Or did you want to redeem yourself?
Speaker 2:No, no, no, we're going to get both of yours, so that way.
Speaker 3:Well, see, mine aren't like that, mine are more like one-liners. Oh okay, well, let's go, let's have them All right. As you guys know, I love going outdoors. It's much safer than going out windows.
Speaker 5:Yeah, it's much safer than going out windows. Yeah, that silence is for a reason no, whatever.
Speaker 3:Okay, I have my last one. I'm having a hard time getting the yoga instructor I hired out of my house. Every time I ask him, he says namaste.
Speaker 2:That was a good one All right.
Speaker 3:Well, that wraps up this compliance episode mini series dad jokes. Michael, thank you very much for your time, as always, and again, thank you for everything that you do for for Acuma, our community and our industry.
Speaker 5:Good to be with you, gentlemen.
Speaker 3:Thank you.
Speaker 2:Of course.
Speaker 3:And Justin. Thank you, of course, it was my pleasure. And, to close out, thank you again to Consolidated Analytics for sponsoring today's episode and to all of you. We know your time is valuable. Thank you for tuning in to the latest episode of Acuma's On Point podcast. We hope you enjoyed it. Until next time. Be well, my friends.
Speaker 1:Thanks for listening. We'll see you next time at the Acuma On Point podcast. If not already, be sure to subscribe and give us a five-star rating For more great episodes and information. Be sure to visit us online at acumaorg and get the latest updates head over to our linkedin page.
