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CFPB: Consumers must not be Collateral Damage in Servicing Transfers
spate of large loan servicing transfers has prompted the Consumer Financial
Protection Bureau (CFPB) to issue a bulletin advising servicers about their
obligation to consumers during such moves.
Through public feedback and its
supervision activities, the CFPB has noted a significant number of servicing
complications related to the large amount of servicing transfers that have
occurred in the last year. Because of
its supervisory authority over both banks and nonbanks CFPB said it is
reminding everyone in the mortgage servicing industry to minimize the risks
that these servicing transfers can present to consumers.
Transfers of loans should not mean that paper work or
loss mitigation plans are lost or that homeowners are hindered in any way from preventing
an unnecessary foreclosure CFPB said and warned that servicers engaged
in significant servicing transfers should expect the Bureau will, in
appropriate cases, require them to prepare and submit informational plans
describing how they will be managing the related risks to consumers.
should not be collateral damage in the mortgage servicing transfer process,"
said CFPB Director Richard Cordray. "This guidance directs all mortgage
servicers, both banks and nonbanks, to follow the laws protecting borrowers from
the risks of such transfers, and makes clear that we will be monitoring them
servicing transfers are common and occur when a mortgage owner sells the right
to service its loans or when the owner outsources the servicing duties. These
transfers can be logistically challenging, sometimes involving moving of
hundreds of thousands of loan documents. They can also be positive for
consumers, especially when investors move loans to specialty companies offering
better service. They can also be
disruptive as consumers must deal with a new company and its forms and
paperwork, different staff, and addresses for payments. If the
transfer process is not handled properly, consumers may find that their
servicer lost important loss mitigation documents or that the servicer did not properly
says it will be taking a close look at how the servicer has prepared for the
transfer to ensure no unnecessary disruption either to payment processing or
any loss mitigation activity in process and how the new servicer responds to
customer inquiries related to the transfer and providing relevant information about the
owners of the loan establish loan modification requirements CFPB says it should
not matter who is servicing the loan and customers who have reached an agreement
on loan modification with the old servicer should have those plans honored by
the new one. CFPB will be examining whether the new servicer properly considers
any previous agreements before demanding payments or collecting amounts due.
new mortgage servicing rules that govern servicing transfers that were
announced last month do not go into effect until January 2014, CFPB reminded
servicers that they are subject to federal laws such as: the Real Estate
Settlement Procedures Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, and prohibitions on unfair, deceptive, or abusive
acts or practices.
The Federal Housing Finance Agency
(FHFA) issued a statement following release of the bulleting saying that it
supports CFPB's efforts to improve servicer compliance with transfer
rules. FHFA, it said, shares the goal of
improving servicer performance and has played an active role in
aligning the policies of Fannie Mae and Freddie Mac to streamline servicer
processes and expedite outreach to borrowers to prevent foreclosures, keep
homes occupied and help maintain stable communities."
bulletin can be read in its entirety here.
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