On February 11, 2013, the Consumer Financial Protection Bureau (CFPB) issued a bulletin to residential mortgage servicers to address potential risks to mortgage consumers that may arise in connection with servicing transfers. Apparently, the CFPB is concerned because of the number and size of recent servicing transfers and the consequences of sloppy transfers felt by consumers.
The CFPB warns that servicers engaged in "significant servicing transfers" might be required to prepare and submit plans detailing how the transferring servicers plan to manage consumer risk. The CFPB is putting residential mortgage servicers on notice, once again, that it will be monitoring for compliance with federal laws related to mortgage servicing, including the Real Estate Settlement Procedures Act (RESPA), the Fair Credit Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA), prohibitions on unfair, deceptive, or abusive acts or practices (UDAAPs) and any other applicable initialisms or acronyms. The bulletin details a few examples of potential missteps by mortgage servicers in servicing transfers.
The CFPB states that it is focusing on "servicing transfers that arise from consumer complaints and supervisory work related to servicing transfers." According to the CFPB, "consumers have complained about service interruptions when their loans are transferred during the loss mitigation process."
The CFPB is concerned about situations where the transferee fails to honor the terms of a trial loan modifications provided by the prior servicer due to a failure to transfer paperwork reflecting the terms of the trial modification.
The CFPB then tells servicers what it will be looking for if it comes knocking and what information it will want if it asks a servicer to provide a plan. Residential mortgage servicers should review this bulletin and ensure that their procedures and records are capable of withstanding CFPB scrutiny. One thing is for sure, mortgage servicers can continue to expect increased scrutiny and compliance costs with the CFPB in the picture.
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