Saturday, December 16, 2017

New Rules Proposal for Servicers Coming from the CFPB

Posted by Tom May 3, 2012 4:24pm

Photo Credit: scottchan

Our new best friends, The Consumer Financial Protection Bureau (“CFPB”) is preparing to issue rules proposals for loan servicers regarding the criteria and timeliness of the information flow to consumers.

These rules cover the gamut of the servicing world, from payment processing, to foreclosure notification. The CFPB is attempting to bring “transparency and accountability” bank into the mortgage servicing world.  Some of the most interesting highlights include:

  1. All monthly mortgage statements sent should be easily understood, with a thorough explanation of payment application,  sufficient lead time for rate adjustments (for variable rate loans)  a clear indication of alerts to delinquent borrowers  (e.g., foreclosure help and other counseling). In addition, they are looking to see options presented to borrowers before “forced placed” insurance is put on a property after current  insurance has  expired.
  2. Ensuring that all consumer loan payments are immediately credited to the respective accounts and in the proper fashion (interest and principal, then fees or escrow).
  3. Making certain borrowers have access to records that can be reviewed, and have in place a process that can manage a timely investigation and resolution of a complaint from a consumer.

Generally, it is in the best interests of banking institutions to have this sort of information transparent on a mortgage statement, as the ultimate goal of any loan is to get paid. Reaching out to a customer via telephone can work wonders in regards to delinquency and insurance status.

Timely and proper crediting should also be a no brainer, but apparently larger servicing shops have been having issues that really should be basic accounting. And timely complaint resolution is the hallmark of a small, service oriented community bank.

Community banks for the most part do not employ third party servicers to handle their customers, as the volume of activity isn’t cost effective to warrant such an expense. HOWEVER, as we all know, what generally starts for “larger institutions only” usually trickles down to the community level in a few years, regardless of what is stated initially.

The rules implementation isn’t scheduled to go into effect until January 2013. Click here for more information. 

But it would probably be a good idea to review internal  procedures to ensure that they are in compliance with what is being proposed (its basic customer service for the most part), and tweak what’s necessary, as the other shoe will sooner or later drop for everyone. 

 

Photo Credit: scottchan

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