Speaking at an industry conference in Phoenix, Arizona, Wednesday, Darrin Benhart, deputy comptroller for credit and market risk with the Office of the Comptroller of the Currency (OCC), said the changing regulatory environment requires mortgage lenders to consider a number of potential risks on different fronts.
""As you well know, the list of mortgage-related reforms is extensive,"" Benhart said, naming the qualified mortgage (QM) and qualified residential mortgage (QRM) among them. ""These reforms mean you will need an even greater emphasis on risk management techniques that not only look at credit risk but also encompass operational and compliance risk,"" he said.
While in the past, various aspects of risk were often considered and managed individually, Benhart says going forward, it is important for all risks to be monitored in a holistic manner.
""Risk management groups today need to be multi-dimensional, and banks need a culture that promotes risk identification across business lines,"" he said.
Benhart says home equity lines of credit (HELOCs) and collateral valuations are two key areas his office will be watching in the coming year.
As the industry focused heavily on loss mitigation during the past few years, Benhart says valuations slipped under the radar somewhat. His office reviewed valuation procedures ""in a number of institutions"" and found several common problems, including lack of oversight of appraisal management companies (AMCs), inconsistencies in appraisal processes, and inadequate reviews of appraisals and evaluations.
""Problems ranged from independence, qualifications, and training of reviewers to the scope and depth of reviews,"" Benhart said.
Overall, Benhart expressed an optimistic outlook for the mortgage industry and economy as a whole, though he added, ""we must remain vigilant not to let unmanaged risks slip back into the industry.""