Compliance audits for 2014 are not business as usual.
- We have all been inundated by the volume of changes.
- There is confusion regarding when examiners will be ready to begin compliance examinations for the new and revised requirements and how intense those examinations will be. The regulators have indicated that “… oversight of the new mortgage rules in the early months will be sensitive to the progress made by institutions that have been squarely focused on making good-faith efforts to come into substantial compliance on time.” It is not clear what that statement means, but does not appear to promise complete forbearance.
- Many loan origination software systems (LOS) were not available by the effective dates, or were partially available by the effective dates, or had all functions available but contained obvious errors as the result of a lack of thorough vendor testing.
- Some financial institutions have completed implementation and appear to be in great shape, while others are just beginning the implementation process.
What should you do to assure your compliance audit/review process is ready for the challenges and uncertainty of 2014:
- Update all compliance audit/review policies and procedures;
- Verify that the 2014 audit plan includes coverage of the new and revised requirements;
- Verify that the engagement letter for the external compliance review/audit includes coverage of the new and revised requirements;
- Train internal audit/review staff on the new and revised requirements and make sure external audit/review staff has received proper training on the new and revised requirements;
- Update internal audit/review documentation for the revisions and changes and be sure external audit/review documentation is also updated; and
- Consider a special targeted internal or external review focusing exclusively on the revised and new requirements to assure compliance before the examiners arrive.