Mortgage servicing compliance

Mortgage servicing compliance
Download Mortgage servicing compliance

Complying in a special servicing environment

Regulatory focus on mortgage servicing practices has increased substantially due to high volumes of loan modifications caused by the collapse of the housing market, the advent of government programs such as the Homeowner Affordability and Stability Plan (“HASP”) and proactive loss mitigation efforts by financial institutions to modify loans that are either currently delinquent or that have a high probability of default. Examiners are expanding their attention to this area, with the following areas receiving the most attention:
  • Effectiveness of overall mortgage servicing compliance programs.
  • Specific technical consumer compliance reviews — such as Fair Debt Collection Practices Act (“FDCPA”) and Servicemembers Civil Relief Act (“SCRA”).
  • Fair lending reviews throughout the loss mitigation and loan modification processes due to concerns that borrowers are not being treated equally.
  • Reviews of service costs and fees from both contractual and Unfair and Deceptive Acts and Practices (“UDAP”) perspectives.
In addition to the federal bank regulators, this topic is a key area of interest for State Attorneys General who are starting to make requests for additional data around loan modifications, and the U.S. Congress which is responding to increasing complaints from borrowers that loan modification requests are not being processed in a timely manner. In light of the heightened financial, compliance, and reputation risks in this area, this document highlights some compliance considerations throughout the mortgage servicing process that can help institutions manage these risks and their associated regulatory exposure.