Servicers had to make a lot of changes to their systems in 2014 due to the enforcement of new regulations issued by the Consumer Financial Protection Bureau. Many industry executives believe the top focus for servicers this year will be geared toward compliance.
The servicing industry has gone years with no standard of compliance and this is a critical issue for servicers as the delinquency rate continues to decline, said Scott Goldstein, president and CEO of assure360, in an interview.
"There needs to be some gold standard for compliance that people can get their head around and start performing to," Goldstein added. "Right now, sometimes there are contradictory messages between servicers of what is compliant and what's not compliant. That needs to be corrected."
One of the biggest problems a servicer faces is if a borrower's personal information gets leaked out, Goldstein cautioned. After the data leakage that occurred at Target stores last Thanksgiving as well as problems individuals faced signing up for health insurance on the healthcare.gov website, Goldstein is adamant that a huge security breach could potentially shake every industry, even the servicing industry.
"Our industry is still very fearful of headline risk because we've been beaten up in the newspapers before," Goldstein says. "Executives in charge of these servicers are very cautious and will do the right thing to ensure it doesn’t happen again."
Adjusting to the Jan. 10 new servicing rules may not be the only challenge servicers have to contend with. Last November, the CFPB took the first step toward considering consumer protection rules for the debt collection market. The bureau is collecting information on a variety of issues, including the accuracy of information used by debt collectors, how to ensure consumers know their rights, and the communication tactics collectors employ to recover debts.
The main law that governs the industry and protects consumers is the Fair Debt Collection Practices Act. One of the major changes that the CFPB wants to implement is instituting a first attorney debt collector into the FDCPA. This means that when a servicer picks up the phone to call a borrower about a payment, the CFPB will essentially consider them a debt collector, which has never been the rule before.
"There is some overlap between the mortgage servicing rules and how you treat the borrower, such as harass or abuse people in phone calls, and this is an extension to the degree that a lot of servicers are pretty upset," says Alberta Hultman, executive director and CEO of USFN.
Currently, debt collection is on par with mortgages in terms of daily complaint volume, with both accounting for approximately 30% of consumer grievances, the CFPB mentioned in a press release.
Law firms are already considered debt collectors under the FDCPA and follow a set of rules that have been in effect for approximately 10 years, Hultman said. Also, there are professional conduct rules law firms are subject to observe on a state-by-state case.
"This is an additional layer of regulation from the CFPB that is supposed to help consumers, but the law firms are very concerned it is going to create way more confusion when they get multiple notices of the same thing but stated in different ways," Hultman says. "There's always been an issue for the law firms and for retail collection attorneys. It used to fall under the offices of the FTC, but with Dodd-Frank it got transferred to CFPB, and now they're coming up with some proposed rules which some will affect law firms."
The CFPB extended the request comments period for the debt collection Advance Notice of Proposed Rulemaking until Feb. 24. But Hultman doesn't know if this is enough time for people to voice their opinions on this proposed rule due to all the other changes happening across the industry.
"The first wave of rules has just happened and people are watching and making adjustments. So it's kind of interesting they are rolling out a whole new set because so many people protested saying we're really busy focusing on the other set of 14 rule changes and we don't have time to analyze and comment," she said.
Technology continues to evolve as an important tool for servicers to utilize if they want to remain in compliance with all of the industry regulations in affect today.
In general, technology helps mortgage servicers reduce the amount of manual labor an employee has to do. Overall, technology makes it easier for an individual to do their job properly and makes sure that a servicer is close to being 100% compliant to the rules.
Goldstein and assure360, formerly known as NDeX, deliver customizable information and case management systems, as well as secure private cloud and hosting services to default servicing firms. By developing and deploying the infrastructure of a secure and redundant private cloud, assure360 controls everything that goes into its data centers, which maximizes efficiencies and minimizes the risk of data loss.
The Farmington Hills, Mich.-based company's two signature products are ProMatters and MediaVault. ProMatters is a case management system that handles all the information associated with a file. It digitally stores and automatically produces the documents required to handle a case and is designed to walk staff through the file process in a workflow driven way.
"Automating the work, giving users only the fields required for completion at each stage of the file process, ensures that every step in the process is fulfilled in accordance with compliance requirements," assure360 said about ProMatters, which has been launched in five default law firms.
MediaVault is a software-as-a-service application that allows companies to store, classify, categorize and retrieve content, including office documents, images, videos and sounds. Many applications that do imaging are "very memory and storage intensive," Goldstein says, but MediaVault accommodates massive amounts of content with zero degradation of system performance. Furthermore, all materials hosted in MediaVault are secured and encrypted, and retrievable via direct reference or by querying content metadata.
Both products can be sold as subscription. Even though Goldstein has seen companies not invest in technology during the recession, he is optimistic this will be different in 2014 as the economy improves.
"Folks aren't interested in making a huge investment in technology. But they are willing to spend on technology monthly that is more palatable for them," Goldstein continued.