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62 quences for the financial services industry. Just this past October, Waters introduced the Megabank Accountability and Consequences Act, which would empower federal regulators like the Federal Reserve and FDIC to break up banks with records of customer abuse. However, political uncertainty doesn't mean servicers are powerless. For Steve Bailey, Chief Mortgage Operations Officer for PennyMac, a nonbank servicer, regula- tion isn't always black and white. "At the core of these regulations is the safety and soundness of your company," Bailey said. "If you incorporate those rules into your workflow, then the customer will respond more favorably to you, and you'll have fewer complaints." STILL, STAYING COMPLIANT ISN'T ALWAYS CHEAP. e Mortgage Bankers Association (MBA) reported in July that servicing costs for nonper- forming loans declined year-over-year in 2016, with defaults averaging $2,113 per loan, down from $2,386. ese costs stem from the special- ized services rendered for delinquent mortgages, but they're also subject to a bevy of rules that the Dodd-Frank Act ushered in with the Consumer Financial Protection Bureau (CFPB) back in 2010. e year-over-year numbers belie an increase for the industry at large. According to a 2015 report authored by PricewaterhouseCoopers and the MBA, the cost to service nonperforming loans skyrocketed by 489 percent between 2008 and 2013. Performing loans increased by 264 percent in the same period. "e amount of man-hours that goes into pre- paring for audits and then executing those audits, the back-and-forth, it's absolutely enormous in terms of costs," said Ray Brousseau, President of Carrington Mortgage Services. "I think the pendulum has swung too far," he added. LEARNING TO SURF Policymakers around the country are report- edly pushing through new state laws requiring disclosure in the housing industry due to storms that rocked the nation in the last year. "I don't think anyone can deny the frequency of these storms," Bailey stated. "Whether lender or servicer, you have to embrace the facts of the losses, because it works its way back into pricing for loan products." Regulators would seem to agree, and they're not waiting to take action. e New York Times reported in 2017 that California, Pennsylvania, and Washington are passing laws that require banks and agents to disclose a property's past flooding and susceptibil- ity to future disasters. In turn, these new laws may only further the uncertainty swirling around compliance ahead of the 2018 midterm elections. e tax bill that President Trump signed into law in December is also adding to uncertainty about what lies ahead. As Freddie Mac advised in a 2017 report, "Changes in tax policy could have potentially large effects on the economy." e National Association of Home Build- ers released a statement in which its chairman, Granger MacDonald, blasted the legislation for "eviscerate[ing] the mortgage interest deduction and strip[ping] the tax code of [a] . . . vital home- ownership tax benefit." In his statement, MacDonald added that the tax bill, now law, would ultimately "harm home values, act as a tax on existing homeowners[,] and force many younger, aspiring home buyers out of the market." e Washington Post reported in December that many housing economists and analysts now believe housing prices will slow down as a result of the new tax law, a real damper since they've consistently increased for the last five years. However, while the tax bill alters some popular items such as the standard deduction, some experts see this as addressing a longstanding problem within the housing market. Edward Glaeser, an economist at Harvard, told the New York Times in December that the changes to the standard deduction suggest " … a limit in the federal government's willingness to subsidize ownership. It's also a reflection of just how expensive housing has become, and how it feels problematic to be using the tax code to sup- port people buying houses that are this expensive or, even worse, to be encouraging housing prices to rise even further." "Too much and frequent changes in regula- tions becomes hard for us as a company and indus- try," said Gagan Sharma, President and CEO of Texas-based BSI Financial Services. "We would like more stability in terms of a set of transparent rules and guidelines that we can follow. It'd help with the compliance issue." Karan Kaul, a Research Associate with the nonpartisan Urban Institute, felt that policy- makers could do more good for everyone in the "Too much and frequent changes in regulations becomes hard for us as a company and industry. We would like more stability in terms of a set of transparent rules and guidelines that we can follow. It'd help with the compliance issue." -Gagan Sharma, President and CEO, BSI Financial Services

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