CFPB: Consumers must not be Collateral Damage in Servicing Transfers

by devteam February 12th, 2013 | Share

A recentrnspate of large loan servicing transfers has prompted the Consumer FinancialrnProtection Bureau (CFPB) to issue a bulletin advising servicers about theirrnobligation to consumers during such moves. rnThrough public feedback and itsrnsupervision activities, the CFPB has noted a significant number of servicingrncomplications related to the large amount of servicing transfers that havernoccurred in the last year.  Because ofrnits supervisory authority over both banks and nonbanks CFPB said it isrnreminding everyone in the mortgage servicing industry to minimize the risksrnthat these servicing transfers can present to consumers. </p

Transfers of loans should not mean that paper work orrnloss mitigation plans are lost or that homeowners are hindered in any way from preventingrnan unnecessary foreclosure CFPB said and warned that servicers engagedrnin significant servicing transfers should expect the Bureau will, inrnappropriate cases, require them to prepare and submit informational plansrndescribing how they will be managing the related risks to consumers.  </p

“Consumersrnshould not be collateral damage in the mortgage servicing transfer process,”rnsaid CFPB Director Richard Cordray. “This guidance directs all mortgagernservicers, both banks and nonbanks, to follow the laws protecting borrowers fromrnthe risks of such transfers, and makes clear that we will be monitoring themrnfor compliance.”</p

Mortgagernservicing transfers are common and occur when a mortgage owner sells the rightrnto service its loans or when the owner outsources the servicing duties. Theserntransfers can be logistically challenging, sometimes involving moving ofrnhundreds of thousands of loan documents. They can also be positive forrnconsumers, especially when investors move loans to specialty companies offeringrnbetter service.  They can also berndisruptive as consumers must deal with a new company and its forms andrnpaperwork, different staff, and addresses for payments.   If therntransfer process is not handled properly, consumers may find that theirrnservicer lost important loss mitigation documents or that the servicer did not properlyrncredit payments. </p

CFPBrnsays it will be taking a close look at how the servicer has prepared for therntransfer to ensure no unnecessary disruption either to payment processing orrnany loss mitigation activity in process and how the new servicer responds torncustomer inquiries related to the transfer and  providing relevant information about thernloans.</p

Becausernowners of the loan establish loan modification requirements CFPB says it shouldrnnot matter who is servicing the loan and customers who have reached an agreementrnon loan modification with the old servicer should have those plans honored byrnthe new one. CFPB will be examining whether the new servicer properly considersrnany previous agreements before demanding payments or collecting amounts due.</p

Whilernnew mortgage servicing rules that govern servicing transfers that werernannounced last month do not go into effect until January 2014, CFPB remindedrnservicers that they are subject to federal laws such as: the Real EstaternSettlement Procedures Act, the Fair Credit Reporting Act, the Fair DebtrnCollection Practices Act, and prohibitions on unfair, deceptive, or abusivernacts or practices.</p

The Federal Housing Finance Agencyrn(FHFA) issued a statement following release of the bulleting saying that itrnsupports CFPB’s efforts to improve servicer compliance with transferrnrules.  FHFA, it said, shares the goal ofrnimproving servicer performance and has played an active role inrnaligning the policies of Fannie Mae and Freddie Mac to streamline servicerrnprocesses and expedite outreach to borrowers to prevent foreclosures, keeprnhomes occupied and help maintain stable communities.” </p

CFPB’srnbulletin can be read in its entirety here.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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