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The CFPB remains dissatisfied with the advancements the mortgage industry has achieved in the wake of the regulatory upheaval, as evidenced in the recently released special edition of its Supervisory Highlights. Many of the concerns expressed by the CFPB relate to information technology failures. As noted in the Supervisory Highlights, “[t]he magnitude and persistence of compliance challenges since 2014, particularly in the areas of loss mitigation and servicing transfers, show that while the servicing market has made investments in compliance, those investments have not been sufficient across the marketplace.” Supervisory Highlights Mortgage Servicing Special Edition, p. 3. Notably, the CFPB attributes many of the failings to technology failures.
The CFPB Approach to Servicer Examinations. The CFPB readily admits that it uses a prioritization approach to determining which mortgage servicers to examine. Its approach takes into account:
Lessons to Be Learned from the Supervisory Highlights. Those involved in the mortgage industry should pay particular attention to this edition of the Supervisory Highlights and adjust their policies, practices, and procedures accordingly. Here are the key takeaways:
The CFPB noted multiple instances where consumer communications did not accurately reflect the mortgage servicer’s actions. Mortgage servicers should carefully review their communications and loss mitigation procedures to ensure they are consistent. For instance,
Here, the CFPB noted:
Specifically, the CFPB noted that one or more servicers violated Regulation X because their policies and procedures were not reasonably designed to:
In this respect, the CFPB noted that one or more servicer incompatibilities between servicer platforms have led to transferees failing to identify and honor in-place loss mitigations.
The Bottom Line. Some the concerns raised by the CFPB are the result of system malfunctions and technology deficiencies. As noted by the CFPB, “improvements and investments in servicing technology, staff training, and monitoring can be essential to achieving an adequate compliance position. However, such improvements have not been uniform across market participants. Supervision continued to observe compliance risks, particularly in the areas of loss mitigation and servicing transfers.” Mortgage servicers are encouraged to review their compliance management systems to ensure their servicing platforms are accurately servicing their practices and should pay careful note to the concerns raised in the Supervisory Highlights as these are often the precursor to regulatory enforcement actions.
Caren Enloe is a partner who concentrates her practice in consumer financial services litigation and compliance, bankruptcy, and commercial litigation with an emphasis on creditor’s rights. She has a deep understanding of the complex compliance environment surrounding the financial services industry and regularly advises financial service companies on licensing and compliance issues involving state and federal consumer protection and finance statutes. Caren is the author of a daily blog titled: Consumer Financial Services Litigation and Compliance where she posts timely and informative updates regarding the CFPB, FTC, and a host of topical litigation issues involving consumer protection law....LEARN MORE