Magazine article American Banker

CFPB to Patrol Risks from Mortgage Servicing Handoffs

Magazine article American Banker

CFPB to Patrol Risks from Mortgage Servicing Handoffs

Article excerpt

Byline: Joe Adler

WASHINGTON -- The Consumer Financial Protection Bureau released guidance on Monday that will require mortgage servicers to detail plans for reducing mishaps stemming from when they exchange the rights for managing a portfolio.

The CFPB bulletin, which was issued nearly a month after the bureau finalized a broad series of general requirements for mortgage servicers -- warned of recent consumer complaints about service interruptions, the failure of new servicers to recognize terms of loan modifications and other complications arising from transfers of servicing rights between companies.

"Consumers should not be collateral damage in the mortgage servicing transfer process," CFPB Director Richard Cordray said in a press release. "This guidance directs all mortgage servicers, both banks and nonbanks, to follow the laws protecting borrowers from the risks of such transfers, and makes clear that we will be monitoring them for compliance."

The bureau said examiners will begin focusing on servicers' ability to ensure a smooth transition during such transfers, including for when a new servicer takes on the rights to loans going through pending loss mitigation. Supervisors will also ensure servicers are complying with statutory provisions related to transfers, including the Real Estate Settlement Procedures Act and the Fair Credit Reporting Act.

"It appears transferee servicers sometimes fail to honor the terms of trial loan modifications provided by predecessor servicers because relevant documents are not transferred to the transferee servicer, or the transferee servicer does not take adequate steps to identify mortgages subject to trial loan modifications," the bulletin said. "The CFPB is making these and other servicing transfer-related issues a focus of supervisory activities in the mortgage servicing area. …

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