Compliance professionals sometimes think that the interest rate market does not make a difference in the way that they manage their Compliance Management Program (CMP). After all, companies need to comply with the law no matter the interest rate environment. While that is true, my experience in this field dictates that an effective CMP needs to monitor different issues depending on the volume, which is directly correlated with rates. As one of my bosses told me early in my career “This is a simple business. When rates are high, volume is low. When rates are low, volume is high.”
So, what changes for a compliance professional? In a low-rate environment, you might be monitoring timeliness of loan disclosures, making underwriting decisions within 30 days, and quality of assistance provided to first time homebuyers. In a high-rate (low volume) environment, presumably there is capacity to send out disclosures and to make underwriting decisions within the Regulation B requirements. But increasing rates also can lead to disputes around rate lock policies. There are also incentives to try to make any deal work. A strong CMP is flexible enough to change as interest rates and volumes change.
For this series, I am focused on sharing snippets of the critical compliance issues we are facing as an industry. For more details, please email me jjaffee@housingfinancestrategies.com.