OMG, the ABC’s of CFPB!
Let Mortgage CUSO’s deal with the new mortgage servicing rules
“For many borrowers, dealing with mortgage servicers has meant unwelcome surprises and constantly getting the runaround. In too many cases, it has led to unnecessary foreclosures…Our rules ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes. Servicers were unprepared to work with borrowers that needed help to deal with their individual problems…People did not get the help or support they needed, such as timely and accurate information about their options for saving their homes. Servicers failed to answer phone calls, routinely lost paperwork, and mishandled accounts.”
CFPB Director Richard Cordray
In the wake of the financial crisis, foreclosures skyrocketed, bankruptcies increased and borrowers felt helpless to correct the situation. The Dodd-Frank Act imposed new requirements on servicers and provided the foundation for the Consumer Financial Protection Bureau (CFPB). The CFPB has the authority to both implement the new requirements and to adopt additional rules to protect consumers. The Bureau is exercising that authority to improve the information consumers receive from their servicers, enhance the protections available to consumers to address servicer errors, and to establish some baseline servicing requirements that will provide additional protections for consumers who have fallen behind on their mortgage payments.
The CFPB is designed to protect consumers from wrongful actions by mortgage servicers. That’s simple enough. But the rules & regulations and policies & procedures meant to lead to black & white…not so much. And that gray area can lead to severe consequences, which is why working with a mortgage CUSO like TruHome Solutions is critical to your long-term mortgage business. Sure, America sometimes has a short memory, but not with the near takedown of the financial industry. So this is likely to be with us for a very long time.
Dealing with the new mortgage servicing rules doesn’t have to be difficult. In fact, by leveraging a mortgage CUSO, it’s a snap. To be honest, there’s great news among the complexity. Overall, the regulations don’t impact credit unions as much because we are very member centric. In fact, because credit unions provide very personal service and a single point of contact for members, certain exemptions were granted. The CFPB made certain exemptions to the new mortgage servicing rules for small servicers that service 5,000 or fewer mortgage loans (that they or an affiliate either own or originated).
So depending on your portfolio, the regulations impact you differently. I think the CFPB did a good job narrowing the regulations down. And I wanted to make the main nine categories even clearer. That’s just part of what we do!
- Periodic Billing Statements (2013 TILA Servicing Final Rule): Creditors, assignees, and servicers must provide a periodic statement for each billing cycle containing, among other things, information on payments currently due and previously made, fees imposed, transaction activity, application of past payments, contact information for the servicer and housing counselors, and, where applicable, information regarding delinquencies.
- Interest-rate adjustment notices for ARMs (2013 TILA Servicing Final Rule): Creditors, assignees, and servicers must provide a consumer whose mortgage has an adjustable rate with a notice between 210 and 240 days prior to the first payment due after the rate first adjusts.
- Prompt payment crediting and payoff statements (2013 TILA Servicing Final Rule): Servicers must promptly credit periodic payments from borrowers as of the day of receipt. A periodic payment consists of principal, interest, and escrow (if applicable).
- Force-placed insurance(2013 RESPA Servicing Final Rule): Servicers are prohibited from charging a borrower for force-placed insurance coverage unless the servicer has a reasonable basis to believe the borrower has failed to maintain hazard insurance and has provided required notices.
- Error resolution and information requests (2013 RESPA Servicing Final Rule): Servicers are required to meet certain procedural requirements for responding to written information requests or complaints of errors.
- General servicing policies, procedures, and requirements (2013 RESPA Servicing Final Rule): Servicers are required to establish policies and procedures reasonably designed to achieve objectives specified in the rule.
- Early intervention with delinquent borrowers (2013 RESPA Servicing Final Rule): Servicers must establish or make good faith efforts to establish live contact with borrowers by the 36th day of their delinquency and promptly inform such borrowers, where appropriate, that loss mitigation options may be available.
- Continuity of contact with delinquent borrowers (2013 RESPA Servicing Final Rule): Servicers are required to maintain reasonable policies and procedures with respect to providing delinquent borrowers with access to personnel to assist them with loss mitigation options where applicable.
- Loss Mitigation Procedures (2013 RESPA Servicing Final Rule): Servicers are required to follow specified loss mitigation procedures for a mortgage loan secured by a borrower’s principal residence.
So, the bottom line? Mortgage CUSO’s like TruHome Solutions are knee-deep in these regulations, boiling them down to the basics to ensure we help our clients execute flawlessly with member mortgage loans. It currently is, and will remain, a full-time job just to stay ahead of these regulations and anticipate future regulations or changes that will impact the mortgage industry.
While you may be staying abreast (or think you are) of all of the regulations, it’s going to get harder and harder. You have to decide if the risk is worth the reward. Just know we’re here, ready and willing to take that regulatory burden (and lot’s more) off your hands so you can focus on the very superior service that has allowed credit unions to be exempt from some of the regulations in the first place. Seems like a pretty good partnership!