The cost double whammy: Ever since the financial crisis of 2008, the mortgage business, its epicenter, has witnessed steadily increasing regulation in the form of the Dodd-Frank Act, Real Estate Settlement Procedures Act, Truth in Lending Act, Gramm–Leach–Bliley Act, Conduct Regulation and Prudential Regulation (U.K.) etc. While this has succeeded in lowering the default rate, it has also increased compliance costs significantly to more than US$ 1 billion for tier-1 banks, according to one estimate.
What’s more, even when lenders automate processes to bring down these costs, the purpose is often defeated when the system is unable to comply with a regulatory change within the stipulated deadline and a large human workforce is brought in to do the job at additional expense.