By Howard Blum
owner, Pro Mobile Notary
The new requirements of background checks, training, certification and oversight coming from the Signing Professionals Workgroup (SPW) seem to have taken many by surprise, but they actually have been in the works ever since 1999 when the Gramm-Leach-Bliley Act (GLBA) was passed.
The intent of that law was to protect the financial privacy of consumers. However, GLBA also substantially deregulated the financial industry by permitting different types of companies — such as commercial banks, securities firms, insurance companies and the like to merge and operate across state lines. The idea was that less regulation would lead to greater economic expansion.
After an initial boom, the financial industry nearly collapsed in 2008. Along came the Dodd-Frank Act of 2010, enacted to facilitate Wall Street reform and consumer protections. The Dodd-Frank Act established a new government regulator — the Consumer Financial Protection Bureau (CFPB) — and transferred oversight of most existing federal financial consumer protection laws (including the Truth in Lending and Real Estate Settlement Procedures Acts) to the CFPB.
It was the CFPB that mandated many of the changes we are witnessing within the loan-signing industry today. That is particularly true of the guidance and directives dealing with third-party vendors.
There have been a multitude of federal regulator directives over the years to address what is being characterized as Third Party Risk Management and signing agents fall under that umbrella:
- FDIC bulletin FIL-44-2008 of June 2008
- CFPB bulletin 2012-03 of April 2012
- FDIC Compliance Manual of December 2012
- OCC bulletin 2013-29 of October 2013
All the directives and mandates being issued by different agencies within the government on how to conduct business and protect consumer financial privacy was driving lenders and title companies crazy. Their response was to form the SPW and develop standards for signing agents.
While this level of change to a profession that has largely been unregulated can be disconcerting, the SPW is a blessing in disguise.
As the owner of a signing service, I would find it difficult to operate in our current environment without the element of clarity, consistency and continuity the SPW’s standards will bring. Why?
There are countless lenders, title companies, settlement agents and escrow companies, many of which already were setting their own guidelines on what background screening company to use, what training regimen to incorporate and how to oversee to the signing agents they used. Under the directives from the CFPB, that situation would only get worse without a common, industry standard. It would destroy the industry’s vitality and virtually destroy the ability to function using NSAs overnight.
Is the SPW perfect? Of course not. It is just getting off the ground, and it is a collaboration of many of the stakeholders in an effort to standardize everything that is being required of them. Like any tectonic shift within any industry, there are going to be bumps in the road.
Since the SPW announced the publication of its standards, there has been some pushback from the signing agent community. Some have argued that, as public officials, Notaries can only be regulated by their state governments. No argument there, but that is absolutely the wrong perspective.
From what I have seen so far, the SPW is not trying to mandate laws. What they are doing is essentially setting down guidelines for lenders and title companies to adopt and implement.
No, you do not have to adhere to the guidelines being established. You also do not have to do loan document signings or seller package signings. You are welcome to say never mind to the background check and certification standards and do nothing more than general Notary work. It is a simple axiom: if you want to sign their documents, then you need to follow their rules.
From my experience people always seem to be reluctant and resistant to change. I guess it is a part of the human condition. I too would rather not have to shoulder the new administrative burdens of what must be done. But I also want to remain in this business.
I spent 25 years working in the mortgage banking industry. The same Dodd-Frank legislation that is leading to these changes had much greater impacts on other industries. I maintained a real estate license in CA for nearly 25 years because I was working in the mortgage lending arena, and it is what is required to do loan originations in the Golden State. When the National Mortgage Lending System was rolled out and a federal license was required in addition to what the states required, I walked away from it. I decided the cost-benefit ratio was simply not there for me.
I suspect that many NSAs will walk away from this business for a variety of economic, personal and societal reasons and that is okay. My favorite phrase coined by former Fed Chair Alan Greenspan was, “creative destruction.” When the telephone came into being, it put a large number of telegraph operators out of business. When the auto industry embraced robot technology, there were many assembly line jobs lost. These things happen.
Creative destruction is currently in play within the signing agent community. After giving my options serious considerations I decided to stay in this business and I can understand why others might leave. Free choice is one of the things that make this country great.
Stay tuned as this saga is just beginning.