Both Fitch Ratings and the Mortgage Bankers Association have reacted to the Consumer Financial Protection Bureau's (CFPB) proposed rules for mortgage servicers which were released on Friday.  The rules, now posted for a sixty-day comment period, cover servicer protocols when dealing with mortgage servicing in general and with borrowers having financial difficulties.

Fitch said that in general it views the proposed rules positively because, if implemented, they would set consistent standards for all servicers, including smaller nonbank entities "that have thus far avoided the mandated changes."  Fitch, however, warned that the rules, like other servicing focused initiatives, will further increase compliance costs.   

The proposal builds on many of the changes already implemented under the consent orders and settlement between banks and several state Attorneys General including extensive changes or enhancements to procedural, staffing, and technology procedures.  However, Fitch said these rules governed only the actions of the largest banks and CFPB has effectively extended their scope to govern both banks and nonbanks of all sizes and types.  "While these changes should be manageable for larger banks, Fitch Ratings believes their impact will be most directly felt by smaller institutions due to the higher impact of compliance costs."  These new rules will further increase compliance costs for the industry and potentially drive further consolidation within mid to smaller servicers.

David H. Stevens, President and CEO of MBA issued a statement on behalf of the Association applauding CFPB for moving forward with proposed rules which he said his group supports if they ensure appropriate and uniform protections for borrowers.  Equally important, standards must allow lenders to operation efficiently and meet any legal or contractual obligations to their investors. It is important that the final rules do not give preference to one business type over another and also essential that they do not inhibit industry innovation or discourage new market entrants, Stevens said.

MBA has begun the process of reviewing the proposed standards and Stevens said he is confident that final rules can be achieved which will create more confidence and certainty in the real estate industry for borrowers and servicers alike.