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New CFPB notice covers mortgage servicer obligations
WASHINGTON (2/12/13)--In guidance released Monday, the Consumer Financial Protection Bureau reminded mortgage servicers and subservicers of potential risks associated with mortgage transfers, and of their obligations to homeowners.

"This guidance directs all mortgage servicers, both banks and nonbanks, to follow the laws protecting borrowers from the risks of [mortgage] transfers, and makes clear that we will be monitoring them for compliance… Consumers should not be collateral damage in the mortgage servicing transfer process," CFPB Director Richard Cordray said in an agency release.

"The CFPB's concern in this area is heightened due to the number and size of recent servicing transfers that have been made by some of the biggest banks," Credit Union National Association Associate General Counsel Jared Ihrig noted.

CUNA is pushing the CFPB for more guidance regarding the exemption for small servicers and its impact on credit unions, he added.

The CFPB in the guidance emphasizes that mortgage servicers are subject to the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act and other laws that prohibit unfair, deceptive, or abusive acts or practices.

The agency also warned servicers that it will monitor:

  • How they have prepared for the transfer of servicing rights or responsibilities;
  • How they plan to treat homeowners;
  • How a homeowner's paperwork is treated;
  • How any loss mitigation efforts that have already begun are addressed; and
  • What policies the servicers have to prevent borrower harm for loans with loss mitigations in process.
In the release, the CFPB noted that mortgage servicing transfers can at times be positive for consumers, "especially when investors require nonperforming servicers to transfer rights to specialty companies that offer better service."

However, a mortgage servicing transfer can also mean new bill paying arrangements, paperwork, servicer mailing addresses and staff. "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 credit their payments on time," the CFPB warned.

For the full CFPB release, use the resource link.

The CFPB's final mortgage servicing rule, issued last month, requires mortgage servicers to meet new periodic statement requirements, provide additional notice of rate changes to borrowers and help ensure that consumers know their options to prevent foreclosures. The new regulations will become effective in Jan. 2014.

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