Due to its ‘concern’ over the ‘continuing high volume of servicing transfers,’ the Consumer Financial Protection Bureau (CFPB) is reminding mortgage servicers that it is now applying its new mortgage servicing rules which went into effect in January when it conducts reviews of mortgage servicing rights (MSR) transfers.
Servicers had better abide by those new rules – or face stiff penalties – the bureau warns.
‘We will not tolerate consumers getting the runaround when mortgage servicers transfer loans,’ Richard Cordray, director of the CFPB, declares in a press release.
The CFPB says it is particularly concerned with what happens to loans that are in loss mitigation or under trial modification when they are transferred.
‘During a number of examinations, CFPB examiners determined that servicers had failed to properly identify loans that were in a trial or permanent modification with the prior servicer at time of transfer,’ the bureau states in its bulletin. ‘In other exams, CFPB examiners found that servicers had failed to honor trial or permanent modification offers unless they could independently confirm that the prior servicer properly offered a modification or that the offered modification met investor criteria. In some of these instances, CFPB's examination determined that the transferee servicers did not obtain all of the information they needed from the transferor servicer.
‘As a result, the servicers required borrowers to submit additional paperwork or to provide copies of financial documents they had already submitted to the transferor servicer,’ the bulletin states. ‘These servicers also subjected some borrowers to substantial delays while re-underwriting their loans. In some cases, the borrowers subsequently received a new modification with inferior terms, and in others, the servicer actually conducted a foreclosure sale. In all of the cases discussed above, CFPB examiners concluded, based on the particular facts, that the servicers had engaged in unfair practices…’
The CFPB says that, moving forward, its examiners ‘will carefully scrutinize transfers of loans with pending loss mitigation applications or approved trial and permanent modification plans.’ Servicers should be ‘flagging those loans and taking special care to ensure that all relevant documents are transferred in a timely manner,’ the bureau says.
‘If servicers are not fulfilling their obligations under the law, the CFPB will take appropriate actions to address these violations and seek all appropriate corrective measures, including remediation to harmed consumers,’ the bulletin states.
In general, the new servicing rules require servicers to ‘maintain accurate records, promptly credit payments and correct errors on request’ when transferring MSRs. Servicers are also required to ‘maintain policies and procedures to facilitate the handover of information when a servicer transfers a loan to a new company.’
Servicers that engage in ‘significant servicing transfers should expect that the CFPB will, in appropriate cases, require them to prepare and submit informational plans describing how they will be managing the related risks to consumers,’ the bureau warns.
The bulletin, which outlines the steps servicers should be taking when transferring MSRs in detail, adds that the bureau ‘may engage in further rulemaking in this area.’
The bureau says when its examiners are reviewing such transfers, they will be taking into account a range of new regulations that are part and parcel of its servicing rules, including compliance with the Real Estate Settlement Procedures Act and its implementing regulation, Regulation X; the Truth in Lending Act and its implementing regulation, Regulation Z; the Fair Credit Reporting Act and its implementing regulation, Regulation V; the Fair Debt Collection Practices Act; and the Dodd-Frank Wall Street Reform and Consumer Protection Act's prohibitions on unfair, deceptive, or abusive acts or practices.
To view the full bulletin, click here.
In addition, the bureau maintains a regulatory implementation website covering all of its new mortgage rules, which can be accessed here.