Thursday, December 14, 2017

Risk Management Principles


Chairman and Managing Director

A number of years ago I coined the term “Mortgage Risk Management,” in order to differentiate managing mortgage risk from the many other types of risk management. At that time, risk management was associated mostly with such areas as pharmaceutical companies, stock brokers, and information technology firms. My view was that mortgage loan originations and mortgage servicing present a unique set of risks to consumers, loan originators, mortgage servicers, and those industries and individuals that depend on the foregoing for their financial well-being. The term became popular and is in now in commonplace use.

But I also realized that managing mortgage risk would require a strong commitment on the part of companies, because regulatory oversight would fluctuate, often prey to the prevailing politics, and that meant companies had to build out an environment where managing risk could be joined to complying with the regulations themselves. I felt that a company could be successful in managing its mortgage risk if it developed a “Culture of Compliance.”[i] I wrote articles on the Culture of Compliance and gave numerous talks on this subject. In due course, the term was picked up by regulators and made a feature of everyday parlance.

I think consumers, mortgage loan originators, and regulators read my articles and attend my lectures because I strive to give everyone a fair shake. I call it like I see it, without fear of whether some view or another is stepping on somebody’s sacred political toes. Sometimes there really is a right and a wrong, irrespective of the controversy surrounding a regulatory mandate.

My standard is simple: doing all we can to protect the consumer is the only way to protect the viability of the mortgage loan originator and mortgage servicer in the long run.

And the only effective way to ensure that the originator or servicer is protected is to manage its risk. That is the basis for the formation of our firm so many years ago. Lenders Compliance Group®, which has grown to a national mortgage risk management firm over the years, has never lost its original mission to not only provide comprehensive risk management to mortgage industry participants but also offer ways and means to help build a Culture of Compliance for our clients.

Every loan originator and mortgage servicer should be a consumer advocate. Consumers will flock to the companies that present the very best standards of ethics and reliability. If any originating or servicing entity waits for a regulatory agency to tell it what to do on behalf of consumer financial protection, it has already lost the right to expect the consumer’s loyalty.