CFPB expresses “heightened” concern over MSR transfers
New bulletin reminds servicers of responsibilities to borrowers
In a new bulletin, the Consumer Financial Protection Bureau is expressing “heightened” concern over the “continuing high volume” of mortgage servicing transfers.
The volume of mortgage servicing rights that have been available for sale has been increasing of late. As HousingWire reported on Monday, at least $9.2 billion in MSRs have been brought to the market since Ocwen Financial (OCN) Executive Chairman William Erbey called the entire MSR market “frozen” after the New York Department of Financial Services put a $2.7 billion MSR deal between Ocwen and Wells Fargo (WFC) on an indefinite hold.
In the new bulletin, the CFPB said that it is reminding servicers of their responsibilities to borrowers, “in light of potential risks to consumers that may arise in connection with transfers of residential mortgage servicing rights.”
The CFPB also said that it will be “carefully reviewing servicers’ compliance with Federal consumer financial laws applicable to servicing transfers.”
In the bulletin, the CFPB writes that it plans to pay specific attention to the companies involved in “significant” servicing transfers and in some cases, require those companies to submit written plans to the CFPB detailing how it will manage the “associated consumer risks” that come with MSR transfers.
“The CFPB will use these plans to assess consumer risk and inform further examination planning,” the CFPB said. “Servicers do not need approval from the CFPB before moving forward with servicing transfers unless specifically required to do so (e.g. by a consent order).”
The CFPB lists eight specific items that it may request from servicers, which are:
- The number of loans involved in the transfer
- The total servicing volume being transferred (measured by unpaid principal balance)
- The name(s) of the servicing platform(s) on which the transferor stored all relevant account-level information for transferred loans prior to transfer and information about compatibility with the transferee’s systems
- A detailed description of how the servicer will ensure that it is complying with the applicable new servicing rule provisions on transfers
- A detailed description of the transaction and system testing to be conducted to ensure accurate transfer of electronic information and a description of the summary report resulting from the transferee or transferor’s testing
- A description of how the transferee will identify and correct errors identified in connection with the transfer, including a specified time period for reviewing files and resolving errors
- A description of the training plan and actual training materials for staff involved in reviewing, assessing, utilizing, or communicating information regarding the transferred loans
- A customer-service plan, specific to the transferred loans, that provides for responding to loss mitigation requests or inquiries and for identifying whether a loan is subject to a pending loss mitigation resolution or application
Also in the bulletin, the CFPB notes the requirements set for mortgage servicers in the Real Estate Settlement Procedures Act, which include requiring servicers to “maintain policies and procedures that are reasonably designed to achieve the objectives of facilitating the transfer of information during mortgage servicing transfers and of properly evaluating loss mitigation applications.”
The CFPB said that the transfer of information is critically important for loss mitigation. “There is heightened risk inherent in transferring loans in loss mitigation, including the risk that documents and information are not accurately transferred,” the CFPB said in the bulletin. “CFPB examiners will therefore pay particular attention to servicers’ handling of loss mitigation in the context of transfers.”
The CFPB said that it found several issues during some of its previous examinations of servicers, including:
"During a number of examinations, CFPB examiners determined that servicers had failed to properly identify loans that were in a trial or permanent modification with the prior servicer at time of transfer. In other exams, CFPB examiners found that servicers had failed to honor trial or permanent modification offers unless they could independently confirm that the prior servicer properly offered a modification or that the offered modification met investor criteria. In some of these instances, CFPB’s examination determined that the transferee servicers did not obtain all of the information they needed from the transferor servicer.
"As a result, the servicers required borrowers to submit additional paperwork or to provide copies of financial documents they had already submitted to the transferor servicer. These servicers also subjected some borrowers to substantial delays while re- underwriting their loans. In some cases, the borrowers subsequently received a new modification with inferior terms, and in others, the servicer actually conducted a foreclosure sale. In all of the cases discussed above, CFPB examiners concluded, based on the particular facts, that the servicers had engaged in unfair practices and directed them to adopt policies and procedures to prevent continued unfair practices in this area and to remediate harmed consumers."
The bulletin also states that CFPB mortgage servicing examinations now include reviews for compliance with the new servicing rules and cautions that it is "continuing to monitor the mortgage servicing market and may engage in further rulemaking in this area."