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Eleventh Circuit Refuses to Impose a ‘Least Sophisticated Consumer’ Standard to Discharge Violations https://t.co/FwkJpuXtnq
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 leads Smith Debnam’ s consumer financial services litigation and compliance group. In her practice, she defends consumer financial service providers and members of the collection industry in state and federal court, as well as in regulatory matters involving a variety of consumer protection laws. Caren also advises fintech companies, law firms, and collection agencies regarding an array of consumer finance issues. An active writer and speaker, Caren currently serves as chair of the Debt Collection Practices and Bankruptcy subcommittee for the American Bar Association’s Consumer Financial Services Committee. She is also a member of the Defense Bar for the National Creditors Bar Association, the North Carolina State Chair for ACA International’s Member Attorney Program and a member of the Bank Counsel Committee of the North Carolina Bankers Association. Most recently, she was elected to the Governing Committee for the Conference on Consumer Finance Law. In 2018, Caren was named one of the “20 Most Powerful Women in Collections” by Collection Advisor, a national trade publication. Caren oversees a blog titled: Consumer Financial Services Litigation and Compliance dedicated to consumer financial services and has been published in a number of publications including the Journal of Taxation and Regulation of Financial Institutions, California State Bar Business Law News, Banking and Financial Services Policy Report and Carolina Banker. ...LEARN MORE