The Consumer Financial Protection Bureau’s (CFPB) efforts to streamline mortgage disclosures and the closing process will likely demand heightened cooperation between lenders and settlement services providers in the coming months. However, regulators’ vendor management expectations are already having an impact on the lender/service provider relationship. In a keynote speech at October Research, LLC’s 2014 National Settlement Services Summit (NS3) in June, Mike Flynn, executive vice president and general counsel with Flagstar Bank, will describe what lenders need from their settlement services providers to remain compliant.
“The question of third-party vendor management for lenders is a growing area of focus, emphasized by the recent guidance regulators issued,” Flynn said.
Regulators such as the Office of the Comptroller of the Currency (OCC) and Federal Reserve issued detailed vendor management expectations in recent months. The OCC stressed in an October 2013 bulletin that it expects “more comprehensive and rigorous oversight and management” of third-party relationships that involve “critical activities,” including settlements.
“The lenders are going to have to be able to know that service providers they’re engaging with can meet those requirements or help them meet those requirements,” Flynn noted. “Some requirements are on the third-party vendor. Some are on the party using the third-party vendor.”
Flynn has a deep knowledge of the relationship between lenders and settlement services providers. He has spent more than 20 years in legal and financial leadership roles, with a focus on mortgage originations and servicing, major litigation and regulatory matters and federal refinance programs. He joined Flagstar in March 2013 as general counsel with responsibility for all legal operations. Earlier in his career, he was vice president and general litigation counsel for Chicago Title Insurance Co., with responsibility for the company’s corporate- and major-claims litigation.
Flynn said lenders are currently working on their third-party vendor management programs. Much of the work is internal. However, institutions are increasingly reaching out to their vendors to request information they need in order to meet the regulators’ third-party management expectations.
“We’re in an era of heightened regulatory concern about third-party vendor activities and any activities of vendors that are consumer-touching, which is the case in these transactions,” Flynn said. “The need for diligence and vigilance is only going to stay at the high level it is at presently, or grow, which will obviously affect what the service providers have to provide for their own sake and the sake of their lender customers.”
At NS3, Flynn will provide insight on how lenders view these issues. He will also discuss the information vendors need to be prepared to provide to enable lenders to meet the regulators’ vendor management expectations.
“I’m going to flesh out some of these thoughts for the speech, and I’ll take questions. I’m sure a lot of people in the audience from the service provider side will have their own perspectives, so I’m looking forward to that,” Flynn said.
Click here to get more information about the 2014 National Settlement Services Summit in New Orleans June 9-11, including the agenda and a list of speakers. You can register for the Summit online or click here to get information about how to register via mail, fax or phone.