ProVest Deals With the Compliance Trickledown Effect

The trickledown effect of mortgage default servicing compliance requirements has tangled into a laborious process various entities from servicers to their attorneys, to third party legal service providers like ProVest LLP.

The Tampa, Fla.-based legal support firm serves a niche market that is costly, complex and increasingly complicated.

Mortgage servicing compliance requirements and constant monitoring by federal regulators have by default changed how the corporate counsel representation works in the mortgage space. It is a much more labor-intensive job, says EVP of ProVest, Vic Draper, and it is obvious the legal review process for services will continue to become more and more elaborated.

Until two years ago foreclosure attorneys were not audited by the servicers, or Fannie Mae and Freddie Mac to the extent they are audited now, recalls Draper, whose mortgage industry experience expands 28 years. “They are being audited like crazy," he added, and have to fill out a growing number of questionaires.

Compliance requirements have made the work of attorneys so challenging some legal firms have chosen to exit the mortgage market, he said.

Legal pressures also have pushed ProVest to implement a forward looking preemptive strategy that creates the supply before demand materializes. New mortgage default servicing regulatory requirements are included into updated forms immediately after new regulation comes out. “It helps to get ahead of the curb,” Draper says, and is far more effective than waiting for mortgage servicers, attorney clients, or Fannie Mae and Freddie Mac to make requests.

Along with the rest of the marketplace the default servicing compliance has become more complex as regulators delegate new requirements. For example, servicers are now legally responsible for all vendors and other third-party service providers they use to manage mortgage loans, Draper says. Other requirements apply in most areas.

Due to mounting regulatory pressures from legislation like the Dodd-Frank Act and federal regulators like the Consumer Financial Protection Bureau, “awareness regarding audit, compliance risk, and need for technology has grown significantly over the past two years, so we have invested millions of dollars in process services in those areas.”

ProVest serves over 200 legal firms nationwide.

To better serve the needs of a growing network of clients, ProVest hired one of the chief auditors at Bank of America to run its audit and risk division, another executive whose experience includes years of work with a state attorney general is heading the ProVest compliance division. Both departments oversee process technology implementation, data reporting and data integration to ensure accuracy each time mortgage documents are filed in a courthouse, he said, plus in house audits are conducted to ensure they comply with all local and state-level requirements.

ProVest manages a large number of foreclosure related paperwork, along with early delinquency workout services for some of the largest servicers including Bank of America and Wells Fargo. “Also, these banks often need assistance to locate people who are in their early delinquency stage,” he said.

The new $8.5 billion settlement signed by the largest servicers earlier this year may give servicers some leverage going forward. Draper argues that since servicers are no longer required to conduct individual foreclosure reviews, and can file bulk foreclosure reviews, “the foreclosure volume will start picking up,” generating more work for attorneys and companies like ProVest.

He agrees with those who think the servicer settlement agreements of the recent past and other measures taken by the industry and the regulators have resulted in a more forward looking mortgage market “that is more or less in the right place.”

ProVest mostly focuses on the judicial foreclosure process, he adds, where at least in the near future “the foreclosure volume will start to pick up” without reaching the peak of 2008-2009. But, he adds, data and analytics from LPS, CoreLogic, RealtyTrac and other real estate market data providers indicate, “It’s going to be a longer runway…probably until 2016 or 2017.”

Draper sees as positive, however, that the crisis helped improve the market. In the past few years, since October 2010, even though the mortgage lending process has become laborious and expensive, market changes are serving well both borrowers and servicers, he says.

At ProVest the amount of paperwork now amounts to hundreds of thousands of unique documents and processes that are specific to the geography of the property and the sum of county, state and federal laws that apply to it.