August 20, 2014
The Consumer Financial Protection Bureau has issued a Compliance Bulletin and Policy Guidance on Mortgage Servicing Transfers (Bulletin 2014-01). Mortgage Serving Transfers have been receiving a lot of attention (also here) recently from regulators as the servicing industry is going through many changes.
The CFPB is right to focus on the impact of the transfer of mortgage servicing rights on homeowners. Many complaints made directly to regulators and seen in foreclosure cases relate to the Kafkaesque treatment that homeowners receive as their servicer point-of-contact changes from interaction to interaction.
The Bulletin indicates that servicers will have to do a fair amount of planning to ensure that consumers are not harmed by the transfer of servicing rights. In particular, the CFPB will be watching to see that servicers are (WARNING: Boring and Technical Language Alert!):
- Ensuring that contracts require the transferor to provide all necessary documents and information at loan boarding.
- Developing tailored transfer instructions for each deal and conducting meetings to
discuss and clarify key issues with counterparties in a timely manner; for large transfers, this could be months in advance of the transfer. Key issues may include descriptions of proprietary modifications, detailed descriptions of data fields, known issues with document indexing, and specific regulatory or settlement requirements applicable to some or all of the transferred loans.
- Using specifically tailored testing protocols to evaluate the compatibility of the
transferred data with the transferee servicer’s systems and data mapping protocols.
- Engaging in quality control work after the transfer of preliminary data to validate that the data on the transferee’s system matches the data submitted by the transferor.
- Recognizing when the transfer cannot be implemented successfully in a single batch and implementing alternative protocols, such as splitting the transfer into several smaller transactions, to ensure that the transferee can comply with its servicing obligations for every loan transferred. (3)
As a bonus, the Bulletin provides an overview of statutes and regulations that govern the transfer of mortgage servicing.| Permalink