Stevens: Give National Servicing Standards a Chance to Work

Mortgage Bankers Association (MBA) President David H. Stevensrncongratulated mortgage servicers attending MBA’s National Mortgage ServicingrnConference on Wednesday for surviving the past few years with the “staggeringrnamount of change” from new rules and regulations and the “intense scrutiny ofrnpolicymakers, regulators, and the news media.” rn</p

In the last year, hernsaid, the Consumer Financial Protection Bureau (CFPB) released the mortgagernservicing final rule and revisions to that rule continued nearly until therndeadline for implementation last month. rnThe past year also saw no less than 40 new HUD mortgagee letters, newrnguidelines and announcements from Freddie Mac and Fannie Mae, and new requirementsrnissued by individual states.  Thesernchanges have forced servicers to rework policies, processes, controls, andrnsystems and to make it all work for their customers</p

Stevens told servicers that,rnwith their help, MBA convinced CFPB to make several important changes to thernrules before they were implemented such as abandoning a requirement thatrnservicers accept oral requests from customers for error resolution andrninformation, narrowing designated address requirements for communicating withrnborrowers, and limiting the definition of first notice to more closely matchrnthe FHA definition and conform with state laws and contractual obligations.  </p

The mortgage servicingrnbusiness does not look the same as it did a few years ago, he said.  The top 10 servicing companies are differentrnthan those five years ago as new players entered and others expanded,rncontracted, or retrenched; the complexity of new rules has added to costs; therernare new direct costs, unreimbursed foreclosure and REO costs as well asrncorporate costs of legal, risk management and technology.  All these are ultimately passed to thernconsumer, further tightening the credit box and dragging on the recovery.</p

Stevens told thernservicers he had a number of areas of potential concern for the industry.  First is the need to stay ahead of the curvernwhen it comes to defaults.  Whilernmortgage delinquencies are down close attention must be paid to borrowers whosernpayments may increase as modification terms expire.  </p

Second, while servicersrnare doing everything they can to clear delinquency and foreclosure backlogs inrnan efficient and sensitive manner, some states keep rewriting their foreclosurernprocedures while in others servicers are still wading through the slow judicialrnforeclosure process.  Moving forward, he said, “Potential litigationrnaround qualified mortgages threatens to delay the process even further, runningrnthe risk of turning every state into a ‘quasi-judicial’ foreclosure state.” <br /<br /The pile-on of regulations continues beyond just the national servicingrnstandards, Stevens said. Servicing is now potentially one of the most regulatedrnindustries, facing a host of competing regulations and requirements from a myriadrnof different regulators and little has been done by regulators to align theirrnregulations and to minimize duplication of efforts.<br /<br /"Problematic MSR valuation provisions within Basel III, the forthcoming CFPBrnsupervisory examinations, litigation risks, frequent rule changes by FanniernMae, Freddie Mac, Veterans Affairs, and FHA, and more states considering theirrnown standards only lead to more disruptions in your world and disruptions forrnborrowers,” he said.  <br /<br /He said the only recourse is to re-prioritize and adjust servicing plans tornaccommodate the competing interests and CFPB has pledged to continue working tornstrengthen servicing standards for consumers but still recognizes it isrnimportant to let servicers do their jobs efficiently and effectively.  Stevens told them his organization has an “openrndoor” to the CFPB, and with member input will continue to work for improvementsrnto national servicing standards and reduce conflict and duplication between themrnand other regulatory requirements. <br /<br /Some states have tried implementing their own standards on top of the nationalrnstandards, resulting in more divergence and confusion.  CFPB has addressed all the major consumerrnissues, he said, and everyone would benefit from a single, uniform nationalrnservicing standard.  MBA is pushing states to work with the CFPB beforernimplementing their own standards.  <br /<br /Stevens said MBA will be focusing on three major problem areas that are unnecessarilyrnhindering servicers’ ability to effectively serve borrowers.<br /<br /First – debt collection.  CFPB is looking at whether all servicers shouldrnbe subject to the Fair Debt Collection Practices Act.  This goes well beyond Dodd-Frank and “demonstratesrna fundamental misunderstanding of the role of a mortgage servicer.”  MBA, after meeting with CFPB, is encouragedrnthat the Bureau understands the negative impacts of this approach. </p

Second is the alignmentrnof regulatory requirements.  The GSEs, other agencies and investors haverneach overlaid requirements for borrower contact, delinquency management, andrnforeclosure prevention on CFPB regulations. rn Consequently, servicing todayrnrequires juggling numerous, often duplicative requirements and timelines inrnaddition to whatever requirements are imposed by the borrower’s state. <br /<br /Stevens said this misalignment is most clear in the imposition of GSE compensatoryrnfees.  "Data shows that servicers nowrnface compensatory fees not for mistakes or unreasonable delays, but simply asrnthe cost of doing business.  In fact, approximately 70% of all GSE loansrnare now exceeding the standard GSE time frames, often for reasons unrelated tornactions of the servicer</p

“As servicers work tornimplement the CFPB’s borrower protections and deal with complex, widelyrnvariable state rules, it is a mistake for the GSEs to impose unfair fees thatrnpunish servicers for enforcing those same protections.  Fannie and Freddiernmust update their timelines to reflect the realities on the ground, and ensurernthat the process for imposing compensatory fees going forward is transparent,rnpredictable, and reflects the stated goals of the GSEs in imposing them.”<br /<br /As to his final concern – exams and audits – Stevens said federal auditors andrnCFPB supervisory exam teams would soon be taking up space in the servicers’rnoffices.  He urged members to make use ofrnMBA resources to guide them through the compliance process </p

Stevens concluded by sayingrnit is time for servicers to focus on what they do best, helping borrowers andrnbringing value to their companies.  “It’srntime we put the black eyes of the past behind us.  It’s time forrnpolicymakers – national and state – to stop the endless, overreachingrnregulations and let the standards in place have time to work.”

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