WASHINGTON (8/20/14)--New guidance issued by the Consumer Financial Protection Bureau (CFPB) illustrates things the bureau's examiners will look for loan servicing responsibilities are transferred. The CFPB's new mortgage servicing rules took effect Jan. 10 and are intended to protect borrowers from runarounds by loan servicers.
The guidance, issued by the bureau Tuesday, comes with several months of examinations under the new rules and highlights policies that are likely to get a financial institution flagged, as well as policies that meet the rule's requirements.
The new rule requires servicers to maintain accurate records, promptly credit payments, correct errors on request and maintain policies and procedures to facilitate handing over information when a servicer transfers a loan to a new company.
The CFPB currently has examination authority for financial institutions with more than $10 billion in assets. While that currently means only a few credit unions fall under the bureau's examination supervision, the new guidance is important for credit unions of all sizes, said Colleen Kelly, senior assistant general counsel for regulatory affairs for the Credit Union National Association.
"This guidance provides helpful compliance information for all credit unions that transfer mortgage servicing," she said.
The guidance lays out several specific scenarios in which CFPB examiners concluded that the servicers had engaged in unfair practices, including:
- Failing to properly identify loans that were trial or permanent modifications with the prior servicer at time of transfer;
- Failing to honor trial or permanent modification offers unless the servicer could independently confirm that the prior servicer properly offered a modification or that the offered modification met investor criteria; and
- Borrowers subsequently receiving a new modification with inferior terms, and in one case, the servicer conducted a foreclosure sale.
According to the CFPB, the servicers in the scenarios above were directed "to adopt policies and procedures to prevent continued unfair practices in this area and to remediate harmed consumers."
CFPB examiners consider transferors flagging all loans with pending loss mitigation applications, as well as approved loss mitigation plans (including trial modification plans) as having met the new rule's requirements.
Transferees requiring the transferor servicer to supply a detailed list of loans with pending loss mitigation applications, as well as approved loss mitigation plans will also be considered at having met the new requirements.
Use the resource link below to access the full bulletin.