DS News

» VISIT US ONLINE @ DSNEWS.COM 63 alone. Many banks are turning to asset manage- ment providers with existing scaled operations who have demonstrated deep-rooted knowledge in compliance, marketing, and asset disposition. Here are the three key requirements for an effective asset management provider: » Robust Compliance and Quality Assur- ance Programs: Sustainable compliance and quality assurance programs are not about "checking the box." An effective compliance and quality assurance framework requires a portfolio of preventative controls focused on leading indicators throughout the asset man- agement lifecycle to identify possible points of failure before failures occur. Operational discipline to maintain consistent review, monitor accountability and develop leading indicator reporting will continue to differ- entiate good asset managers from the rest of the pack. » Comprehensive Asset Management Programs: For banks, integration costs can be high, approval processes can be lengthy and late-stage default and REO volumes are low. Effective asset managers demonstrate expertise that spans multiple services, in- cluding short sale, deed-in-lieu, foreclosure auction, CWCOT second chance auction and REO disposition to simplify processes and streamline vendor accountability. A good asset manager can decrease stress and non-value added work for the client team across multiple business processes. » Technology-enabled and Transparent Op- erations: e complexity of making the right decision at the right time for any given asset has increased significantly. For disposition strategies, one size will not fit all. Rather, the most effective asset managers leverage decision trees and logic-based frameworks programmed directly into their workflow. Variables such as emerging regulations, state requirements, local requirements, sales seasonality and asset-level condition require automated controls to ensure consistent application of client rulesets. Banks must have transparency into an asset manager's operations through clear frameworks and analytical reporting (not just data). Our industry has evolved at such a fast pace, successful asset managers cannot operate in their business as usual mode from the past. Driven by compliance and the need to mitigate reputa- tional and financial risks, the mental model has shifted from one prioritizing scale and profit to one prioritizing compliance, reputation and consumer-focused solutions. As we look ahead to the new year, banks and financial institutions will continue to be more selective about the vendors they partner with for asset disposition strategies. e mortgage industry has evolved dramatically over the past few years, and those most adept at meeting new market demands will thrive moving forward. COMPLIANCE DAYNA SILVER Director of Operations, Mortgage Quality Management and Research ird party oversight of vendors is not new, but it has quickly become a key focus for banks, indepen- dent mortgage bankers, and vendors. Long established requirements are being enforced and there is increased scrutiny by the Office of the Comp- troller of the Currency (OCC), the Consumer Financial Protection Bureau (CFPB), and other regulating authorities. Regulators have made it clear that it is no longer enough to have good working relationships with vendors; organiza- tions must assess several critical areas and key controls such as third party networks, business operations, and financial processes, in order to mitigate statutory or regulatory violations and consumer harm. While obtaining a business license, validat- ing insurance, and completing a business back- ground check may have been sufficient in the past, in 2017 vendors will continue to be vetted, but will be required to provide thorough docu- mentation and proof of controls for managing regulatory compliance and consumer protection. is shift in vendor due diligence has required vendors, such as Mortgage Quality Manage- ment and Research, LLC (MQMR), to invest in additional resources and infrastructure to meet this increasing demand on its clients. Our organization has established an internal team to manage the growing volume of due diligence re- quests and onsite audits, as well as requiring our own vendors to comply with the same standards for fourth party vendor management. For years regulators provided lenders with some leniency with regard to vendor manage- ment responsibilities recognizing the stress lenders were under to comply with the Ability to Repay (ATR) and Qualified Mortgage (QM) rule, Servicing Standards and TRID. Now that ATR/QM and TRID are behind us, organiza- tions must focus their efforts on establishing and enhancing their vendor management over- sight. e CFPB has issued warning notices at multiple conferences and most recently noted in its Summer 2016 Supervisory Highlights that examiners found several institutions had weak compliance management systems and warned lenders that they must enhance/strengthen their service provider oversight. In addition, a promi- nent bank and mortgage lender was fined $10 million dollars for ineffective monitoring and training pertaining to a vendor who enrolled EXPERT OPINION "Our industry has evolved at such a fast pace, successful asset managers cannot operate in their business as usual mode from the past. " –MIN LEE ALEXANDER EXPERT OPINION "Outsourcing has provided an opportunity to leverage vendor expertise while establishing scale at reduced cost, but without effective oversight, organizations are at risk of non- compliance, and premium costs to the business." –DAYNA SILVER

• Cover