TRID Highlights Need For Vendor Due Diligence
The performance of vendors in implementing the TRID regulation has been put under the microscope lately and frankly, I think it reflects poorly on the vendor due diligence being carried out by credit unions and other relatively small lenders in the financial marketplace. We don’t need more regulation of vendors. What we do need is more institutions to take the process of vendor due diligence seriously.
I’m fired up after following up on an article I read in this morning’s Credit Union Times. The article related testimony from a rural $59 million credit union that explained to the Senators that difficulties with its vendor had forced it to comply with TRID disclosure requirements by hand.
Furthermore, none other than Richard Cordray explained in a recent speech to the Mortgage Bankers’ Association that he has “been disturbed by reports I have heard about vendors on whom so many of you rely. Some vendors perform poorly in getting their work done in a timely manner, and they unfairly put many of you on the spot with changes at the last minute or even after the due date.” Have no fear, the Bureau is considering devoting greater attention to the unsatisfactory performance of vendors and how they are affecting the marketplace.
Nothing annoys me more than when credit unions argue about the need to reduce regulatory burdens while at the same time implicitly arguing for greater government oversight. I, for one, have no sympathy for a credit union who is struggling to comply with TRID because of vendor incompetence. The industry has had almost two years to choose a vendor and test its systems. This is basic 21st century due diligence.
And let’s be clear. NCUA has stressed the importance of vendor management since at least 2007. (NCUA letter to credit unions, 07-CU-13, December, 2007). Nevertheless, I suspect there are still come credit unions that choose vendors based solely on the recommendation of their peers; save money by not having attorneys review vendor contracts, and don’t assign staff to oversee a vendor’s performance. By taking these basic steps, most credit unions can and do retain vendors who are ready, willing and able to do the work for which they are being contracted.
In addition when a vendor does make a mistake, a well-drafted damages clause can do more to prevent vendor negligence than the CFPB ever could.