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Servicing

CFPB elaborates on new guidelines for servicers

Bureau releases final guidelines for servicing segment

The Consumer Financial Protection Bureau (CFPB) rolled out a final rule Friday to help mortgage servicers comply with the bureau's new servicing standards.

Back in January 2013, the CFPB rolled out a series of national servicing and lending standards, which are set to take effect in January 2014. The servicing guidelines established stronger protections for homeowners dealing with foreclosures, while also revamping loan originator compensation rules to prevent borrowers from being steered directly into risky or high-cost loans.

The CFPB put the finishing touches on its January 2013 mortgage rules in an effort to help the industry comply with the provisions. A series of rule amendments and clarifications released Friday provided servicers with specifics on what the regulator is looking for. 

The release clarifies what servicer activities are prohibited in the first 120 days of a mortgage delinquency, while also outlining procedures for obtaining follow-up information on loss-mitigation applications, the CFPB said.

Furthermore, the information released discusses the appropriate way to offer borrowers short-term forbearance plans and clarifies the CFPB's best practices for informing borrowers about the handling of error resolution documents. The detailed explanation also covers standards for fostering lending in rural and underserved areas and clarifies standards for the financing of credit insurance premiums.

The new release also spells out the definition of a loan originator and revises the effective dates for many loan originator compensation rule provisions.

"Our mortgage rules were designed to eliminate irresponsible practices and foster a thriving, more sustainable marketplace," said CFPB Director Richard Cordray. "Today’s rule amends and clarifies parts of our mortgage rules to ensure a smoother implementation process, which is helpful to both businesses and consumers."

The CFPB also worked to finalize rules that created stronger consumer protections for high-cost mortgages, and instituted a requirement that escrow accounts be established for a minimum of five years for certain higher-priced mortgages.

Chris Michaels, vice president of product development at Equator, told HousingWire that this release will assist servicers across the country in developing a consistent response to the CFPB servicing guidelines. 

"Consistent responses and interpretations to regulatory requirements allow borrowers to experience similar processes, timelines and communications regardless of the servicer," said Michaels. "Rule clarity ensures that servicers are following the intent of the CFPB regulations and helps servicers design procedures that minimize audit risk at a later date." 

According to Michaels, as new regulations have been implemented across the servicing industry, a need has been created for centralized rule management procedures and technology. "Each loan may have a cornucopia of regulatory and contractual obligations that all interact in unique ways," he said.

"Servicers should expect additional amendments and clarifications throughout 2014. Those who are prepared for the inevitable changes will be able to be successful by focusing efforts on client satisfaction and reduced servicing costs," he added.

The Bureau has also published plain-language guides for each rule, along with interim examination procedures.

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