SVB Failure Starts Aggressive Regulation Talk in Washington, IMBs Take NoteThe New Mortgage Closing Etiquette, and a Word or Two about E-Mortgages and E-Closings

March 19, 2020
It did not take long after the Silicon Valley Bank failure for politicians in Washington to rush to the next available microphone and lament the “loosening of bank regulations”. Instinctively the finger pointing began, and in many quarters ended up in the direction of the prior administration’s policy to generally roll back stringent business regulations and allow free market decisions to govern various industries. Chief among the complainants (no pun intended) was Sen Elizabeth Warren, who emerged out of the 2008 crisis as an architect and advocate for the Wall Street Reform Act and the creation of the vaunted Consumer Financial Protection Bureau ( CFPB), which she briefly directed. Just yesterday in DC’s The Hill publication, Sen Warren was reported as blaming the the collapse of Silicon Valley Bank on Republicans in Congress, which in 2018 helped pass a law to ease bank regulations put in place following the 2008 financial crisis. “No one should be mistaken about what unfolded over the past few days in the U.S. banking system: These recent bank failures are the direct result of leaders in Washington weakening the financial rules,” Warren is quoted as saying. According to The Hill piece, Warren, who voted against the 2018 bank deregulation bill, said that the crises would have been avoided if the banks were required to hold more liquid assets because the bill exempted banks with less than $250 billion in assets from rigorous Fed stress tests. Warren and other Democrats say the old rules could have caught the issues at SVB sooner. Given that politicians generally “never let a crisis go to waste,” many now suspect that the banking industry is about to be slammed with heightened regulatory scrutiny, tighter operational rules, more audits and exams, and larger and very public fines, penalties and consent orders. What does this mean for independent mortgage bankers (IMBs)? It means that they have to get back to the compliance mindset they were frightened into adopting between 2008 and 2018, and before the bottoming out of interest rates led everyone to believe that easy money was here to stay and that self-regulation meant hiring more loan officers. Keep those risk management officers and compliance directors close by folks, we are all in for a bumpy ride on the regulatory

In the midst of the current COVID-19 health crisis, lenders and settlement agents who schedule and conduct mortgage loan closings where a small group of people typically gather to sign documents and finalize a transaction should consider adopting a process that offers a safe place to conduct business.  A suggested checklist might include the following:

  1.  Speak with all parties who intend to appear at a live closing and inform them that you will be implementing a clean and safe environment;
  2. Make sure that anyone who is displaying ANY symptoms of illness (coughing, sneezing, runny nose, fever) does not appear and where possible send a substitute professional (realtor, attorney, title agent, notary, escrow officer).  Where a seller or buyer is ill consider, with proper legal advice, whether you can close with a duly executed power of attorney.
  3. Restrict the numbers of persons in the closing room. If necessary mail checks to realtors, limit family members attending, and ask anyone not directly involved not to appear.
  4. Clean the closing room thoroughly, clean all table surfaces, all chairs and the door handles (this must be done before each closing if more than one is taking place that day);
  5. Make hand sanitizer available for everyone;
  6. Make sure that the room is properly ventilated, and open a window if possible;
  7. Offer (new, unused) masks to anyone who may want to use one;
  8. Be prepared so that the participants can get in and get out quickly.  Have all documents ready to sign and notarize,  have all copies made,  have all checks cut and ready to distribute;
  9. Have everyone bring their own signing pens so they are not shared around the table;
  10. Ask the seller to clean keys, garage door openers and anything else being handed over to the buyer at the closing.
  11. Keep the atmosphere pleasant, despite all the precautions the idea is not to create a “war room” environment but simply to create a safe place where people can feel comfortable without being scared.
  12. Lastly, consider learning more about e-mortgages and e-closings as well as remote notarization.  These platforms are the wave of the future and will allow complex mortgage transactions to be managed seamlessly from a distance.  Lenders and closing agents need to learn the e-process however it is not to difficult it just requires a change in the way you think about documents and signatures and notarization.

Secure Insight and DocMagic have been working for a year on developing an e-closing training program to help settlement agents understand the process and be qualified to conduct e-closings using the DocMagic platform.  Given the current interest in expanding the use of e-mortgages and e-closings, we are working very hard to launch an online education and qualification site very shortly. If you wish to know more reach out to us.

In the meantime, get out the cleaning products and masks and keep closing those loans!


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