Magazine article Mortgage Banking

Servicing Transfers-A Top CFPB Focus

Magazine article Mortgage Banking

Servicing Transfers-A Top CFPB Focus

Article excerpt

FOR THE LAST 18 MONTHS, protecting consumers from harm due to the transfer of mortgage servicing rights has been a key focus area for the Consumer Financial Protection Bureau (CFPB). [paragraph] In its guidance, the CFPB has made clear its expectation that mortgage companies ensure a seamless transition for consumers during a transfer to a new servicer and that no adverse impact to consumers occurs as a result of a servicing transfer. The CFPB may hold both the transferring and receiving servicer responsible for adverse consumer impact.

In fact, servicing transfers are the first area of review noted in the CFPB's 2014 Examination Procedures (http://files. consumerfinance.gov/f/201401_cfpb_mortgage-servicing-exam-procedures.pdf).

In CFPB Bulletin 2013-01 (issued Feb. 11,2013), the CFPB provided specific guidance regarding the legal obligations of transferors and transferees, and also advised servicers to refer to overarching federal laws and regulations applicable to servicing. These laws include the Real Estate Settlement Procedures Act (RESPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA) and other prohibitions on unfair, deceptive, or abusive acts or practices (UDAAPs).

The CFPB noted that its growing concern around this issue stems from the large number and size of servicing transfers and the related consumer complaints it has received.

There are three main concerns associated with servicing transfers that could potentially harm consumers: 1) Interruptions in the loss-mitigation or workout process--especially if a package is still in the process of being assembled; 2) missed or late payment posting; and 3) incomplete or missing documentation in the servicing file.

To ensure consumers are not adversely impacted as a result of a servicing transfer, mortgage servicers have been working to enact processes, procedures and technology to help them succeed; however, there are many issues that must be considered.

Here are some of the key due-diligence factors that servicers must address in the transfer process:

* Servicing files: Recent CFPB changes to RESPA require additional information to be maintained in the servicing file. Moreover, the servicer is required to provide this information upon inquiry within five days. Servicers must review the way the servicing file is compiled to ensure all necessary information moves with the file to the transferee and to retain copies of any information it may need to satisfy its own retention, legal and regulatory obligations. Receiving servicers should consider how best to validate that all information necessary for completion of the servicing file has been received from the transferor.

* Customer complaints: Controls must be in place to ensure all customer complaints are addressed within reasonable, if not required, time frames. When a loan transfers with an active complaint, there must be a process to ensure that the complaint is resolved or handed off to the transferee in such a way that it is tracked through to resolution. Transferees should endeavor to ensure that their due-diligence efforts review the status of consumer complaints in the transfer population.

* Servicing platform compatibility: If a servicing transfer is planned between two companies that operate different servicing platforms, there can be a significant amount of preplanning and work to be done before the transfer can occur. …

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