Mortgage Bankers Association (MBA) President David H. Stevens
congratulated mortgage servicers attending MBA's National Mortgage Servicing
Conference on Wednesday for surviving the past few years with the "staggering
amount of change" from new rules and regulations and the "intense scrutiny of
policymakers, regulators, and the news media."
In the last year, he
said, the Consumer Financial Protection Bureau (CFPB) released the mortgage
servicing final rule and revisions to that rule continued nearly until the
deadline for implementation last month.
The past year also saw no less than 40 new HUD mortgagee letters, new
guidelines and announcements from Freddie Mac and Fannie Mae, and new requirements
issued by individual states. These
changes have forced servicers to rework policies, processes, controls, and
systems and to make it all work for their customers
Stevens told servicers that,
with their help, MBA convinced CFPB to make several important changes to the
rules before they were implemented such as abandoning a requirement that
servicers accept oral requests from customers for error resolution and
information, narrowing designated address requirements for communicating with
borrowers, and limiting the definition of first notice to more closely match
the FHA definition and conform with state laws and contractual obligations.
The mortgage servicing
business does not look the same as it did a few years ago, he said. The top 10 servicing companies are different
than those five years ago as new players entered and others expanded,
contracted, or retrenched; the complexity of new rules has added to costs; there
are new direct costs, unreimbursed foreclosure and REO costs as well as
corporate costs of legal, risk management and technology. All these are ultimately passed to the
consumer, further tightening the credit box and dragging on the recovery.
Stevens told the
servicers he had a number of areas of potential concern for the industry. First is the need to stay ahead of the curve
when it comes to defaults. While
mortgage delinquencies are down close attention must be paid to borrowers whose
payments may increase as modification terms expire.
Second, while servicers
are doing everything they can to clear delinquency and foreclosure backlogs in
an efficient and sensitive manner, some states keep rewriting their foreclosure
procedures while in others servicers are still wading through the slow judicial
foreclosure process. Moving forward, he said, "Potential litigation
around qualified mortgages threatens to delay the process even further, running
the risk of turning every state into a 'quasi-judicial' foreclosure state."
The pile-on of regulations continues beyond just the national servicing
standards, Stevens said. Servicing is now potentially one of the most regulated
industries, facing a host of competing regulations and requirements from a myriad
of different regulators and little has been done by regulators to align their
regulations and to minimize duplication of efforts.
"Problematic MSR valuation provisions within Basel III, the forthcoming CFPB
supervisory examinations, litigation risks, frequent rule changes by Fannie
Mae, Freddie Mac, Veterans Affairs, and FHA, and more states considering their
own standards only lead to more disruptions in your world and disruptions for
borrowers," he said.
He said the only recourse is to re-prioritize and adjust servicing plans to
accommodate the competing interests and CFPB has pledged to continue working to
strengthen servicing standards for consumers but still recognizes it is
important to let servicers do their jobs efficiently and effectively. Stevens told them his organization has an "open
door" to the CFPB, and with member input will continue to work for improvements
to national servicing standards and reduce conflict and duplication between them
and other regulatory requirements.
Some states have tried implementing their own standards on top of the national
standards, resulting in more divergence and confusion. CFPB has addressed all the major consumer
issues, he said, and everyone would benefit from a single, uniform national
servicing standard. MBA is pushing states to work with the CFPB before
implementing their own standards.
Stevens said MBA will be focusing on three major problem areas that are unnecessarily
hindering servicers' ability to effectively serve borrowers.
First - debt collection. CFPB is looking at whether all servicers should
be subject to the Fair Debt Collection Practices Act. This goes well beyond Dodd-Frank and "demonstrates
a fundamental misunderstanding of the role of a mortgage servicer." MBA, after meeting with CFPB, is encouraged
that the Bureau understands the negative impacts of this approach.
Second is the alignment
of regulatory requirements. The GSEs, other agencies and investors have
each overlaid requirements for borrower contact, delinquency management, and
foreclosure prevention on CFPB regulations.
Consequently, servicing today
requires juggling numerous, often duplicative requirements and timelines in
addition to whatever requirements are imposed by the borrower's state.
Stevens said this misalignment is most clear in the imposition of GSE compensatory
fees. "Data shows that servicers now
face compensatory fees not for mistakes or unreasonable delays, but simply as
the cost of doing business. In fact, approximately 70% of all GSE loans
are now exceeding the standard GSE time frames, often for reasons unrelated to
actions of the servicer
"As servicers work to
implement the CFPB's borrower protections and deal with complex, widely
variable state rules, it is a mistake for the GSEs to impose unfair fees that
punish servicers for enforcing those same protections. Fannie and Freddie
must update their timelines to reflect the realities on the ground, and ensure
that the process for imposing compensatory fees going forward is transparent,
predictable, and reflects the stated goals of the GSEs in imposing them."
As to his final concern - exams and audits - Stevens said federal auditors and
CFPB supervisory exam teams would soon be taking up space in the servicers'
offices. He urged members to make use of
MBA resources to guide them through the compliance process
Stevens concluded by saying
it is time for servicers to focus on what they do best, helping borrowers and
bringing value to their companies. "It's
time we put the black eyes of the past behind us. It's time for
policymakers - national and state - to stop the endless, overreaching
regulations and let the standards in place have time to work."