• CFPB Releases New Mortgage Servicing Bulletin
  • October 10, 2014 | Author: Robert Lieber
  • Law Firm: Weltman, Weinberg & Reis Co., L.P.A. - Philadelphia Office
  • The Consumer Financial Protection Bureau (CFPB) has issued a new compliance bulletin that addresses new mortgage servicing rules as well as examiner expectations.

    On August 19, 2014, the CFPB released Bulletin 2014-01, which replaced Bulletin 2013-1. The new bulletin adds two new sections to the 2013 guidance, which addressed potential risks to consumers that may arise in connection with transfers of mortgage servicing.1  Bulletin 2014-01 not only restates the major elements of the previous bulletin but also provides examples of policies and procedures that CFPB examiners will likely use in their reviews. While few credit unions have more than $10 billion in assets, thus avoiding direct CFPB examination authority, the new bulletin is nevertheless instructive since its guidance can be used to provide better service and results to credit union members. This article will highlight the most important portions of the new bulletin as it pertains to credit unions.

    Section A, which was not included in the original 2013 bulletin, provides pertinent tips on how the transfer of loans should take place. For example, it recommends that each transfer, regardless of size, should be preceded by a meeting between the parties in order to discuss key issues such as document indexing and specific regulatory or settlement requirements. The CFPB also urges the parties to implement tailored testing protocols to evaluate the compatibility of the transferred data with the servicer’s data and computer systems. Your credit union’s responsibility should not end once the transfer takes place; the bulletin suggests continued reviews of the transfer and monitoring of essential transfer data be conducted to ensure accuracy. Both of these directives are predicated upon common-sense and most credit unions, large or small, would likely benefit from their implementation.

    The topic of loss mitigation is also discussed in Section A. Special attention should be given loans in loss mitigation as the CFPB has stated that there is heightened risk inherent in transferring these loans. Based upon this section, it is imperative that loans in loss mitigation be identified early and that the servicer be notified of the same. It would also be prudent to ensure that the servicer has access to all pertinent documents, ideally before the transfer actually occurs.

    Section B discusses how mortgage servicing transfers may implicate other requirements under the revised Regulation X. Servicers must be mindful of requirements pertaining to error resolution procedures,  force-placed insurance, early intervention, continuity of contact, and loss mitigation. Since the servicer is essentially an extension of your credit union and is in direct contact with your members, it is important that you continue to monitor and evaluate the servicer to ensure that they are meeting these requirements. You should not hesitate to discuss these topics with your servicer in order to understand how they plan to meet or exceed these requirements.

    The remaining sections were already included in the previous bulletin, but are worth mentioning again. Section C again reminds us that certain federal consumer financial laws, such as the FCRA and FDCPA, may be implicated through mortgage servicing transfers. Even if particular conduct does not violate the above-mentioned prohibitions, it may still be deemed an unfair, deceptive or abusive act or practice.  The CFPB again mentions that you should establish and maintain a robust compliance management system.

    Finally, Section D states that the CFPB may require larger servicers to prepare and submit written plans that detail how they will manage consumer risks. Creating a written plan or framework would behoove any credit union, regardless of size.

    Although your credit union may not be subject to direct CFPB oversight, the guidance offered in the 2014-1 bulletin is nevertheless instructive and can be used to bolster your lending practices.


    1
    The full text is available at http://files.consumerfinance.gov/f/201408&under;cfpb&under;bulletin&under;mortgage-servicing-transfer.pdf