For quite some time now, it appeared that the Consumer Financial Protection Bureau was out to get the servicing industry. However, a quick perusal of the new supervisory report from the CFPB might finally be a sign that servicers are no longer at the top of the bureau’s hit list.
The vendetta against servicers by the head of the bureau goes a long way back.
Over five years ago, in the March 2010 issue of HousingWire Magazine, we asked CFPB Director Richard Cordray, “Why is the oversight of the mortgage servicing industry such a priority in your office?”
Cordray responded saying, “Ohio has been hard-hit and was one of the first states hit hard by the foreclosure crisis and in my view, that is the single phenomenon that is holding us back in terms of economic recovery. If we could minimize the number of foreclosures, not only would that lead to less disruption of people’s lives and less dislocation in our communities, but I also think it would remove a significant drag on our economic activity in the state and I think that’s being felt in other states around the country as well."
Fast-forward to the February 2014 issue of HousingWire Magazine, and not much changed in Cordray's tone.
He specifically pointed to the servicing industry when it came to the bureau’s Qualified Mortgage rule, which had just gone into effect on Jan. 10, 2014.
“There have been a lot of problems in that industry. I have seen them very close up when I was a public official in Ohio. It is important for them to take this very seriously and improve their performance and come into compliance with these rules,” he said in the magazine article.
Shortly after this interview, Steven Antonakes, former deputy director of the CFPB, opened a general session at the Mortgage Bankers Association’s National Mortgage Servicing Conference & Expo in 2014, saying, "Nearly eight years have passed and I remain deeply disappointed by the lack of progress the mortgage servicing industry has made.”
His assessment of the servicing industry was not well received at the time. “This audience is the people who are doing the work. These are not CEOs of large companies; these are heads of servicing operations. They are compliance and quality control individuals coming here to make sure they are staying compliant,” David Stevens, MBA president and CEO, said in response to the speech.
Now let’s take a look at this year.
In June 2015, the bureau published its eighth edition of supervisory highlights, covering activities between January 2015 and April 2015, and, once again, servicers were a main focus.
“We are extremely concerned that one year after the CFPB’s mortgage servicing rules went into effect we are still finding run-arounds and illegal dual-tracking,” said Cordray at the time.
“Consumers deserve to be treated with honesty and integrity, and our rules require that servicers give borrowers a fair process when they try to save their homes. The CFPB will continue to stand beside consumers to make sure mortgage servicers are following the law,” Cordray added.
But the report released by the CFPB on Tuesday morning has a very different tone compared to all the examples listed above.
Here’s the bureau’s intro to the servicer section in the report:
While Supervision continues to be concerned about the range of legal violations identified at various mortgage servicers, it also recognizes efforts made by certain servicers to develop an adequate compliance position through increased resources devoted to compliance.
One or more servicers have made significant improvements in the last several years ̶ for example, examiners observed compliance audits that thoroughly assessed the business unit’s internal control environment, clearly identified issues with compliance, detailed management’s response, set a target date for resolving the identified issues, and completed the necessary adjustments promptly. At one or more servicers, these audits were part of a wider and adequately resourced compliance framework.
Moreover, one or more servicers conducted formal reviews of information technology structures and identified the inadequacies causing earlier problems, including system outages. These reviews led one or more servicers to replace outdated systems, such as deficient document management systems. Supervision continues to see that the inadequacies of outdated or deficient systems pose considerable compliance risk for mortgage servicers, and that improvements and investments in these systems can be essential to achieving an adequate compliance position.
The statement uses phrases such as “made significant improvements” and “recognizes efforts,” which haven’t been used by the CFPB to describe servicers in quite some time.
While there are years of history working against servicers at the CFPB, could the report finally be a sign that the CFPB is changing its opinion toward servicers? Or maybe it’s the servicing industry that did a lot of changing in the last year.
Either way, servicers, you can breathe a sigh of relief — for now.