Using Compliance to Rebild Trust

“Our distrust is very expensive” said Ralph Waldo Emerson. He had no idea. The Chicago Booth/Kellogg School Financial Trust Index (for the second quarter of 2012) found that only 21 percent of Americans trust the financial system, the lowest point on record since March 2009. This decrease was largely driven by a drop in trust of national banks. Late last summer Innoveta Strategies conducted a survey of financial services executives and found a strong majority (86%) working on restoring public trust for themselves and the industry. Optimistically 83% felt that public trust in financial services industry can be restored. In his book The Speed of Trust, Stephen M.R. Covey introduces and defends the idea that trust in business and in life is built on competence and character. A lot of pages have been written in the last few weeks on the industry reaction to the CFPB issuance of the Qualified Mortgages\Ability to Repay rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules are far from perfect, but they are specific and will become the starting point in how the federal government regulates the mortgage industry going forward. Incorporating these rules into the human and technological processes used to originate mortgages is now a tactical imperative of industry participants. The mortgage loan origination process has never been more expensive according to the MBA Cost Study. Codifying these rules efficiently provides the opportunity to reduce this cost. Attitude is a significant driver of performance. A bad attitude can derail the best calculated plans. Embracing any task makes its execution more efficient. To ensure efficient execution and demonstrate the competence that helps build trust, it is every leader’s duty to embrace the task before him or her. This might be difficult this time around because in the same Innoveta Strategies Survey, 76% of respondents disagreed that the government understood the challenges to the housing market and 53% disagreed that the government had the best interest of the consumer in mind. The competence with which the industry displays in this stage of a major market overhaul will be a significant contribution to the rebuilding of public trust. Demonstrating a commitment to compliance might even demonstrate a little bit of character.