Nationwide Title Clearing found that out of 2,285,665 servicing database records that were verified against the collateral file, 24,490 loans (1.07%) had significant discrepancies.
When viewed against roughly 49 million outstanding residential mortgages as many as 490,000 homeowners could be affected by faulty servicer database records.
The Consumer Financial Protection Bureau issued a compliance bulletin and policy guidance titled: Mortgage Servicing Transfers on Aug. 19, addressing concerns that the transferor and transferee in all transactions involving MSR or whole loan sales are jointly and separately responsible for the integrity of the data and documents of all loans involved in the transfer.
The document puts particular attention on loans involved in residential mortgage servicing transfers with pending loss mitigation activities.
Although the compliance bulletin is a non-binding guideline, it does accurately reflect the requirements and audit priorities the CFPB will exercise under its authority to act within the powers entrusted to it under Regulation X and RESPA rules.
The document also discusses expectations for verification of data and documents transferred, by both parties involved in the transfer, to ensure they are correct. As with most CFPB regulations it gives general guidelines with the expectation that servicers will develop specific policies and procedures that comply with the spirit, if not the letter, of the regulations.
Nationwide Title Clearing maintains that the industry needs a quality control methodology with which to validate the data in its servicing systems against collateral file or servicing file images. ‘
So that the fine details aren’t overlooked, according to NTC COO Michael O'Connell, one aspect that has a direct effect on servicers' ability to comply with the bulletin, and referred to directly in Appendix A section 12CFR, 1024.38 (b)(4) (i), is that the validation of the database records against collateral files is the responsibility of both sides in the deal.
He further noted that if this point is overlooked faulty data can be passed on to the next servicer. This oversight allows for the possibility of inaccurate information within data fields being transferred to another system. And per NTC, this occurs much too frequently and leaves servicers at risk of noncompliance:
"These database inaccuracies might have represented 'acceptable risk' in times past - but in today's compliance-oriented landscape, such a high number of errors could bring increased scrutiny and penalties from CFPB regulators, not to mention putting a cloud on title and cause trouble for homeowners," said O'Connell.