CFPB: Mortgage Servicers Must Upgrade Systems To Meet Compliance

Some mortgage servicers are still struggling to comply with the Consumer Financial Protection Bureau’s (CFPB) mortgage servicing rules that took effect in January 2014, in part, because they are using “failed technology,” a special report from the bureau finds.

Since the mortgage servicing rules took effect, CFPB examiners have discovered a wide variety of violations, including misrepresentations of terms, fees and deadlines for modifications; errors in mortgage servicing rights transfers; failure to send out notices in a timely fashion; and, at times, failing to communicate with borrowers completely.

The bureau is careful to point out that its special report is based on all of the violations discovered since the rules took effect; many of the servicers found to be in violation have since taken corrective actions.

But many servicers are still committing violations, the bureau says.

“While the servicing market has made some investments in compliance, those investments have not been sufficient across the marketplace to ensure compliance,” the bureau’s release states. “CFPB examiners found that outdated and deficient technology poses risks to consumers across a number of mortgage servicers. In addition, several mortgage servicers lack proper training, testing and auditing of their computer systems and software platforms and those of their service providers. As a result of this insufficient investment, mortgage servicing problems continue to plague consumers.”

The CFPB also gives the industry a glimpse of what its expectations are when it writes the following:

“CFPB examiners also observed that some servicers have made significant improvements in the last several years, in part, by enhancing and monitoring their service platforms, staff training, coding accuracy, auditing and allowing for greater flexibility in operations. For example, one or more servicers had tools in place to search, review and track complaint records for potential regulatory violations. One or more servicers also created a complaint governance committee to oversee all customer complaints to ensure they receive appropriate treatment.”

As such, the bureau says it will be requesting action plans from servicers to show that they have the processes, software and systems in place in order to meet compliance.

“Mortgage servicers can’t hide behind their bad computer systems or outdated technology,” Richard Cordray, director of the CFPB, says in the release. “There are no excuses for not following federal rules. Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally.”

To help servicers meet compliance, the CFPB has released an updated version of its Supervision and Examination Manual “to reflect regulatory changes, to make technical corrections and to update examination priorities.” For more on that, click here.


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