Magazine article Mortgage Banking

USAP, ACC and AGs

Magazine article Mortgage Banking

USAP, ACC and AGs

Article excerpt

A "big time bomb" is waiting to explode for mortgage servicers affected by new federal regulations (Reg AB) intended to make securitized loans more transparent to investors, according to Richard Simonds Jr., a partner with Thacher Profitt & Wood LLP, New York, a panelist at the Mortgage Bankers Association's (MBA's) National Secondary Market Conference & Expo in Chicago in May. Simonds said, "If you're a primary servicer," the new regs are "comparable to USAP [the Uniform Standard Audit Program]; if you're a servicer who also happens to be doing other functions, it's much more involved in terms of additional work you'll have to do." He tells servicers to engage their accountants "as soon as you can--it's the only way they'll get this done on time," which is next March.

At issue is Regulation AB, a Securities and Exchange Commission (SEC) requirement intended to make the marketplace generally--and securitization specifically--more transparent to investors. The regulation codifies and expands rules and regulations for registered asset-backed securities (ABS) sold to the general public.

According to Simonds, "There's some concern based on SEC comments as to the amount of liability that they'll force back on issuers and then primary servicers. They are adamant about full compliance with this," he warned with a foreboding tone. "If someone fails to file timely and with full disclosure--all the attestations--we may see our ability to issue securities shut down. That would be fairly catastrophic. I don't think anyone wants to call the SEC's bluff on this to see whether they'll play hardball."

"Foreclosure-rescue fraud" is the "fastest-growing and newest trend out there," according to Rachel Dollar of Santa Rosa, California, an attorney specializing in mortgage fraud and a speaker at the MBA National Fraud Issues Conference in Chicago in May. "[Investors] seldom realize they're putting money into foreclosure properties," noted Dollar, adding: "It always ends in eviction or foreclosure and loss of the house."

Servicers are urged to emphasize education, so borrowers will be less prone to come-ons from cheats. But those in the trenches say borrowers ignore loss-mitigation efforts. Marge Stanish, loan default manager for Mid-America Mortgage, Downers Grove, Illinois, lamented that despite a servicer's efforts, the debtor "tells the judge they were never contacted. Still, if the fraudsters are the only ones telling borrowers what they want to hear, says Bruce Gottschall, executive director of the Neighborhood Housing Service in Chicago, "they're likely to listen."

After his initial trip to India last winter, Craig Focardi, research director of consumer lending for TowerGroup, Needham, Massachusetts, came back with more than some interesting first impressions of the subcontinent. He also returned with a solid conviction that American financial institutions would likely be sending more work to the growing number of companies springing up there to handle offshoring assignments.

Sharing those beliefs at TowerGroup's annual Financial Services Business & Technology Conference & Exhibition in June in Boston, Focardi said he was "amazed that there are 20-plus vendors serving the U.S. and U.K. markets providing back-office-processing data services focusing on the mortgage industry. Clearly there's a need, and the supply is growing," he concluded. …

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