Mortgage servicing has become a complex business in the post-financial crisis world. Federal regulators, including the Consumer Financial Protection Bureau (CFPB), along with various state agencies, have imposed new regulations on mortgage servicers in recent years that vastly increased operational complexity and, as a result, operating costs.
Mortgage servicers, however, are embracing these new regulations, and as a result, customer service has improved greatly. Mortgage servicers helped millions of borrowers move forward through the financial downturn. They succeeded in implementing new technologies to help them increase efficiency, meet compliance and hold down operating costs, as well as improve customer service. Most importantly, they’ve implemented new policies and best practices to become more “customer centric” organizations.
Still, mortgage servicers remain under intense regulatory scrutiny – and it is likely that more regulations will arrive from the legislative “sausage factory” in the near future. For this reason, mortgage servicers need to play a more proactive role in working with policymakers, said J. David Motley – president of Colonial Savings, FA and its divisions, Colonial National Mortgage and CU Members Mortgage, and 2016 vice chairman of the Mortgage Bankers Association (MBA) – during the MBA’s National Mortgage Servicing Conference and Expo 2016 now under way in Orlando, Fla.
“Duplicative and overly burdensome state regulations are presenting new layers of complexity for servicers and consumers,” Motley said in his prepared remarks. “That’s why MBA maintains a robust relationship with the Conference of State Bank Supervisors (CSBS). We are working with CSBS, as well as individual state regulators and legislatures, to prevent unnecessary and overlapping regulations.
“I’m pleased to note that, thus far, the CSBS proposal has appropriately leveraged existing GSE standards on capital,” he added. “It also tied requirements on servicing transfers and operational matters to CFPB or federal standards. The road to harmonization isn’t always easy but is attainable by working together.”
Giving a specific example of how servicers can control their regulatory destinies, Motley pointed out that the MBA recently worked with the Federal Housing Administration (FHA) in the crafting of three mortgagee letters “that will do three things to make servicing for FHA borrowers less costly and more efficient: They extended reasonable diligence time frames, extended automatic extensions to align better with CFPB loss mitigation requirements, and raised property preservation allowances.”
What’s more, in response to comments filed by the MBA and others, the “FHA recently withdrew a proposed rule that would have imposed maximum timelines on FHA claims.”
Motley urged mortgage servicers to take a more proactive role in working with federal and state legislators in the development of new regulations.
“The time is now to work together – industry, policymakers, stakeholders and consumers – to develop a strong servicing system that provides the best customer service to our borrowers and continues to help those that are struggling to retain their homes,” Motley said. “It’s also time to look at the business of servicing. It’s time to look five, 10 or even more years ahead. Each of us does this with our personal careers, our own businesses, so why not do it with government policy? We must leverage our experience as an industry to work with stakeholders and develop the path forward together.
“Servicing done right and well provides a real value proposition to investors in addition to being a necessity for borrowers,” he added. “We need to make sure that incentives in the market reflect this by rewarding good loan servicing and ensuring a deep and liquid market for servicing buyers and sellers.”
“Everyone knows that costs have risen while revenues have stayed basically flat. Due to increased regulatory attention, increased compliance burden, and large-scale delinquencies, there has been a real need to modernize systems. But, there’s also a need for you to contribute to the greater good of the industry by working with policymakers for a strong, liquid market.”