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Proposed CFPB Rules May Increase Compliance Costs, Drive Servicer Consolidation

by devteam August 14th, 2012 | Share

Both Fitch Ratings and the MortgagernBankers Association have reacted to the Consumer Financial Protection Bureau’s (CFPB)rnproposed rules for mortgage servicers which were released on Friday.  The rules, now posted for a sixty-day commentrnperiod, cover servicer protocols when dealing with mortgage servicing inrngeneral and with borrowers having financial difficulties.</p

Fitch said that in general it views the proposed rules positively because, if implemented,rnthey would set consistent standards for all servicers, including smallerrnnonbank entities “that have thus far avoided the mandated changes.”  Fitch, however, warned that the rules, like otherrnservicing focused initiatives, will further increase compliance costs.   </p

The proposal builds on many of thernchanges already implemented under the consent orders and settlement between banksrnand several state Attorneys General including extensive changes or enhancementsrnto procedural, staffing, and technology procedures.  However, Fitch said these rules governed onlyrnthe actions of the largest banks and CFPB has effectively extended their scopernto govern both banks and nonbanks of all sizes and types.  “While these changes should be manageable forrnlarger banks, Fitch Ratings believes their impact will be most directly felt byrnsmaller institutions due to the higher impact of compliance costs.”  These new rules will further increaserncompliance costs for the industry and potentially drive further consolidation</bwithin mid to smaller servicers. </p

David H. Stevens, President and CEOrnof MBA issued a statement on behalf of the Association applauding CFPB forrnmoving forward with proposed rules which he said his group supports if theyrnensure appropriate and uniform protections for borrowers.  Equally important, standards must allowrnlenders to operation efficiently and meet any legal or contractual obligationsrnto their investors. It is important that the final rules do not give preferencernto one business type over another and also essential that they do not inhibitrnindustry innovation or discourage new market entrants, Stevens said.</p

MBA has begun the process of reviewingrnthe proposed standards and Stevens said he is confident that final rules can bernachieved which will create more confidence and certainty in the real estaternindustry for borrowers and servicers alike.

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About the Author

devteam

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

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