For many years, mortgage servicers operated with little or no regulation and only quasi-governance at best. Operational inadequacies were largely ignored as the mortgage banking community was focused on origination…better, faster and highly profitable.
This is definitely no longer the case.
Since the housing crisis, the mortgage servicing sector has undergone a tremendous renaissance of thinking and a retooling of technology.
Towards this end, Congress established the Consumer Financial Protection Bureau and charged it with protecting consumers by carrying out federal consumer financial protection laws. Basically, the CFPB is poised as the gatekeeper, and sometimes enforcer, of the mortgage servicing sector.
Currently, mortgage servicers are awaiting final rules from the CFPB in several areas. Among the key issues to be addressed and enforced by the CFPB, and their “posse” of state attorneys general, is the requirement of servicers to provide consumers with clear information on an easily discernible billing statement.
Additionally, the forthcoming rules would prevent servicers from charging for forced-placed insurance unless the borrower patently refused to assume that responsibility.
Servicers would also be obligated to notify borrowers of an upcoming interest rate adjustment months in advance and then allow the borrower to refinance or otherwise negotiate the terms of their mortgage, thus avoiding a possible foreclosure.
As the mortgage servicing rules come down from the CFPB, the bureau will be partnering with the AGs to provide direction and establish information sharing protocols when investigating and possibly sanctioning potential offending parties.
Audits with well-defined and established metrics will be the norm. As the transformation in servicing shops continues to morph, meeting audit requirements will become less labor intensive as the needed data is made more readily attainable.
While these changes will likely result in added costs to the mortgage servicers and ultimately the consumers, the costs are truly nominal in comparison to the costs borne as a result of the housing crisis.
Hopefully, the guidance and oversight provided by the CFPB will help assure that the housing crisis and ensuing economic depression will be highly unlikely to occur again.
Diane Gozza is EVP, business development, Integrated Mortgage Solutions, Houston.
