Why is Mortgage Servicing Compliance is a Big Deal for Agents.

Servicing a mortgage loan is no easy task. And then when a pandemic hits, mortgage servicing is even more crucial and more complex. Because on the end of a mortgage loan is a customer. A customer who may have lost income due to job loss or reduction of hours and who is now afraid of losing their home. A customer who did not have the option to choose their mortgage servicer.

Good customer service matters, even more so during a pandemic. Emotions not only run high with the customer, but with the mortgage servicer’s employees as well. Fielding calls, answering questions and navigating regulatory changes to ease the burden for consumers is demanding and nerve-racking.

Many of the regulatory requirements surrounding mortgage servicing involve communications with borrowers. Not communicating at the right time with the right information not only creates violations of laws, but also exposes your financial institution to risk and creates unhappy and confused customers. Therefore, it is important that employees are properly trained to prevent your financial institution from legal cost and compliance risk while providing great customer service.

OnCourse Learning offers a new Mortgage Servicing Compliance Series that includes twelve short eLearning courses designed to enhance mortgage servicing knowledge and to help protect your entity from legal and compliance risk. Mortgage servicing is essential, pandemic or not. Difficult processes are managed during the servicing of a mortgage loan: payment processing, escrow accounts, error resolution, default servicing, and the foreclosure process. So many pieces of these processes involve communicating with borrowers within required timeframes and information. For more information about the Mortgage Servicing Compliance series, visit www.OnCourseLearning.com/mortgage-servicing.

Regulatory compliance roundup - September 2020
Mortgage Servicing Series

To assist you in enhancing employees’ mortgage servicing knowledge and to help protect your entity from legal and compliance risk

OnCourse Learning offers a new Mortgage Servicing Compliance Series

Learn More

In the CFPB’s recent release of its Supervisory Highlights Summer 2020 edition, a section was dedicated to mortgage servicing that highlights violations noted from recent examinations. It’s important to take a quick look and review what the CFPB is citing. Why? To make sure that no gaps exist in your mortgage servicing policies, procedures, and processes. To provide excellent service to your customers. To tighten training protocols.

Let’s take a brief look at what the CFPB is citing in its examinations. Take a moment determine is you have training gaps with staff which could increase legal and compliance risks.

Regulation Z Violations

  • Failure to provide consumers in bankruptcy with periodic statements:

Servicers were required in April 2018 to provide periodic statements to any borrower on a mortgage loan who is in bankruptcy, with the exception of a consumer reaffirming personal liability for the loan. See § 1026.41(e)(5). Violations occurred based on this requirement, but further to understanding the violations are identifying the root causes, which the CFPB noted:

  • Limitations with systems
  • Lack of reconciliation of accounting records maintained by third parties. These records were in regards to bankruptcy costs that were not reconciled to the mortgage servicer’s systems. Because of this, mortgage servicers were unable to provide accurate information about the total amount, payment history, costs, and fees. The CFPB noted that servicers did not send the periodic statements for a certain amount of time, rather than reconciling and sending customers accurate statements.
  • Failure to provide loan ownership transfer disclosures:

Within Section 1026.39, a new owner of a mortgage loan is generally required to send a disclosure with specific content to the borrower once the ownership of a loan has been transferred. The CFPB found during its examinations that servicers did not send the mortgage transfer disclosure to borrowers after acquiring the mortgage loans.

Regulation X Violations

  • Violations after servicing transfers:

The CFPB noted multiple violations:

  • Failure to provide an accurate effective date for the transfer of servicing in the required notice of servicing transfer
  • Failure to exercise reasonable diligence to obtain documents and information necessary to complete a loss mitigation application
  • Failure to credit a periodic payment as of the date of receipt
  • Failure to provide a validation notice within 5 days of the initial communication with borrower when such notice is required, when the servicer is acting as a debt collector
  • Failure to have a reasonable basis for charging borrowers for force-placed insurance

According to Section 1024.37(b), a servicer is required to have a “reasonable basis” for assessing a borrower a charge or fee for force-placed insurance. During its examinations, the CFPB noted that servicers charged borrowers without a reasonable basis for believing that the borrower had not maintained the required hazard insurance. While borrowers, in some circumstances provided proof, servicers failed to their update systems, and borrowers were subsequently charged. Also, other servicers received a bill for the hazard insurance but did not assign it to the proper account. Borrowers were then charged, despite not having a reasonable basis. The CFPB identified root causes such as inadequate procedures and staffing and insufficient servicer provider oversight.

  • Failure to timely refund all force-placed insurance charges for overlapping coverage

Section 1024.37(g) also requires servicers to cancel force-placed insurance and provide a refund for any period of overlapping coverage, which must be done within 15 days of receiving evidence of coverage. The CFPB noted that the root issue for this violation was caused by failure to process proof of insurance from the borrower and inadequate staffing.

  • Permitted repayment options in annual escrow statements

Servicers, according to Section 1024.17, are required to complete an escrow analysis as well as provide borrowers options regarding any shortage or deficiency with the account balance. Which options that are available depend on the extent of the shortage or deficiency. The CFPB noted that in its examinations that options were provided on escrow account statements that were not specified in the regulation.

Lack of training is a significant issue in mortgage servicing, leading to violations as noted in this blog. Equipped with the right tools and knowledge produces and fosters great relationships with customers and strong compliance! This includes ongoing training for staff that OnCourse Learning has available through its Mortgage Servicing Compliance Series. The regulatory requirements highlighted by the CFPB in its Supervisory Highlights are addressed in these courses.

Avoid the costly mistake of your regulator finding violations of which you are unaware. Training is a key element to maintaining a strong compliance position and program. Your employees will be happier and so will your customers.

Now that’s a big deal.

About the Author

Jill Emerson

Owner of Integrity One Consulting

Jill Emerson, owner of Integrity One Consulting, maintains over 30 years’ experience in the financial services industry, both as a practitioner and as a federal regulator. She enjoys sharing her experiences and expertise through writing.

Jill can be reached at integrityoneconsulting@outlook.com.

About the Author

Jill Emerson

Owner of Integrity One Consulting

Jill Emerson, owner of Integrity One Consulting, maintains over 30 years’ experience in the financial services industry, both as a practitioner and as a federal regulator. She enjoys sharing her experiences and expertise through writing.

Jill can be reached at integrityoneconsulting@outlook.com.

The post Mortgage Servicing Compliance is a Big Deal. appeared first on OnCourse Learning.

Mortgage – OnCourse Learning



We will be happy to hear your thoughts

Leave a reply

Agent Factor
Logo
Register New Account
Reset Password
Compare items
  • Total (0)
Compare
0