MBA's Stevens Stresses Importance of Avoiding Unintened Consequences in Letter to CFPB

by devteam October 11th, 2012 | Share

ThernMortgage Bankers Association (MBA) has submitted comments to the ConsumerrnFinancial Protection Bureau (CFPB) regarding the CFPBs August 10 draft ofrnProposed Rules to amend regulations under the Truth in Lending Act (TILA) andrnthe Real Estate Settlement Procedures Act (RESPA) regarding residentialrnmortgage loan servicing.  The MBA’srncomments were submitted Wednesday by David H. Stevens, President and CEO, in arnletter to Monica Jackson, Office ofrnthe Executive Secretary of CFPB.</p

MBA said that it appreciates CFPB’s efforts to create reasonablernnational standards for mortgage servicing but stressed the importance of payingrnattention to cost/benefit change and being mindful of unintended consequences</bthat could result in higher costs and fewer benefits for consumers and reducedrnaccess to credit.</p

MBArnexpressed a general concern that CFPB should limit the rulemaking to thosernrequirements specified by the Dodd-Frank Act and use its exemption authority tornavoid unduly burdensome requirements. rnThis, MBA said, is especially appropriate where servicers are alreadyrnperforming the activities to be regulated such as providing periodic statementsrnor producing ARM disclosures.  </p

MBArnalso asks that the Bureau take appropriate time to formulate the final rule andrnestablish a reasonable implementation period because of the numerousrnregulations that are being formulated and must be implemented, suggesting atrnleast two years from the date of publication to implement the final rules withrnsmall servicers given an additional six months. </p

Therndefinition of small servicers should be expanded to include companies that servicernportfolios smaller than $10 billion and that that amount be indexed to overallrngrowth in outstanding mortgage debt. rnIndependent mortgage servicers should be eligible for the exemption andrnsmall servicers should be afforded other relief and alternatives beyond thernperiodic statement.</p

MBArnprovided a number of comments specific to RESPA.  First it objects to CFPB rules grantingrnborrowers a private right of action against servicers for failing to followrnrequirements not authorized by Dodd Frank nor within the scope of RESPA orrnTILA.  MBA cites specifically the defaultrnservicing and information management provisions where the loss mitigationrnprovisions state that CFPB does not impose a duty on a servicer to offer lossrnmitigation or to approve a particular borrower for it, but still imposes arnright of action if the servicer fails to follow enumerated steps.</p

Lossrnmitigation provisions should not require that a borrower be evaluated for “all”rnloss mitigation options.  This wouldrnrequire the borrower to provide a substantial amount of information andrnpotentially delay the submission of a loss mitigation application and likelyrnresult in more incomplete applications or the unnecessary evaluation of arnborrower for an action in which he has no interest.</p

Thernrequirement that servicers must share loss mitigation applications with otherrnlienholders within five days violates privacy and could create unintendedrnnegative borrower consequences.  Also thernproposed rule requiring oral loss mitigation contracts runs counter to otherrnefforts to improve consumer understanding of their mortgage loans and arerncontrary to investor and federal agency requirements as well as some staternlaws.</p

Consumersrnshould not have the option to submit oral requests for error resolution andrninformation.  The Qualified WrittenrnRequest (QWR) created by Congress ensures that servicers acknowledge a validrnwritten request to correct account errors and deliver requested information andrnalso provides a written audit trail as evidence of their compliance.  The oral request regulation could have arnprofound impact on servicer liability staffing, technology, and costs. </p

Thernrequirement that servicers create a defined standard servicing file availablernto the borrower upon request would require providing the borrower with proprietaryrninformation that is generally not appropriate or helpful to them.  The requirement that servicers retain suchrnfiles for the duration of their servicing plus 12 months must be appliedrnprospectively after an appropriate implantation timeframe.  These information management provisions arernnot required by Dodd-Frank and should not carry a private right of action.</p

MBArnagreed that borrowers should be adequately informed about lender-placedrninsurances and with the regulations on termination, verifications of coverage,rnand refunds but objected to the requirement that lenders provide borrowers withrna good-faith estimate of costs because that information is not readily availablernto servicers, estimates might be incorrect and could confuse the borrower.  MBA asked that the good faith estimate bernreplaced with a statement reflecting the high cost of such coverage. </p

MBArnasks that borrower outreach allow for collection actions.  Not all borrowers who go delinquent are atrnrisk of foreclosure and servicers should be able to seek collection withoutrnresorting to loss mitigation protocols. rnThe early intervention provisions proposed by CFPB are not required byrnDodd-Frank.   Likewise the continuity ofrncontact provisions must be managed to ensure that the servicer uses resourcesrnon borrowers that most need assistance.</p

Inrnits comments specific to TILA requirements MBA states that the changes tornsubsequent adjustable rate mortgage (ARM) rate change notices are unduly burdensomernon servicers and suggests that CFPB not overhaul the notices and not expand therninitial ARM reset notice beyond hybrid ARMS</p

Therncontent and format changes to the periodic statement would require significantrnsystems enhancements with no indication that the current statements arerninsufficient.  MBA asks that the changesrnbe limited to those required by Dodd-Frank and that CFPB consider using its exemptionrnauthority to eliminate the requirement to identify a prepayment penalty amount.</p

MBA supportsrnthe ability, but notrnthernrequirement, to usernsuspense accounts for partial payments and recommends that the applicationrnof payments from suspensernaccounts recognize loans that are subject to statutory requirements for breach notices,rnacceleration, and bankruptcy.Finally, MBA says that while the proposal to providernpayoff statements within seven days of a written request is acceptable additionalrntime should be granted for reverse mortgages, sharedrnappreciation loans, delinquent andrnaccelerated loans, and loansrnin bankruptcy due the complexity of these situations.

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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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