TheMReport

February, 2013

TheMReport — News and strategies for the evolving mortgage marketplace.

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The Latest SERVICING Or ig i nat ion s e r v ic i ng J ust days after unveiling new rules for originations, the Consumer Financial Protection Bureau (CFPB) stepped up its game by turning to the other end the mortgage business—loan servicing. While criticism regarding the qualified mortgage rules has centered around the absence of down payment standards and the inclusion of "safe harbor" statutes, both of which may actually stimulate the types of risk they were designed to mitigate, the CFPB may have compounded the concerns with the recently released requirements for default servicing. For many borrowers, dealing with mortgage servicers has meant unwelcome surprises and constantly getting the runaround. In too many cases, it has led to unnecessary foreclosures," CFPB director Richard Cordray said in a release. "Our rules ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes." Though some of the organization's decisions make sense, especially those that bring the borrower into the process sooner, others place cumbersome restrictions on lenders, like the 120day foreclosure waiting period. Meanwhile, responses to the rules from industry leaders have presented their own dichotomy, with some applauding the CFPB's efforts, as others label the regulations a "missed opportunity." Julia Gordon, director of housing finance and policy at the Center for American Progress, called for the CFPB to roll out even more rules governing mortgage servicing, showing support for a "mandate that all servicers offer affordable loan modifications to homeowners who qualify." Gordon continued her commentary, urging the bureau to work closely with regulators to ensure that modifications don't die down after the Home Affordable Modification Program (HAMP) expires. Providing a different perspective, president and CEO of the Mortgage Bankers Association, David Stevens, said the regulations may introduce inconsistencies with existing policies. "An initial reading of the summary indicates that there are some issues that still concern us," Stevens explained. "For example, the definition of 'small servicer,' while improved, may still be too narrow and there may be inconsistencies between the new rules around dual tracking and existing timelines mandated by Fannie Mae, Freddie Mac, FHA, and the states." One thing both lenders and default servicers agree upon-neither wants to drag out the CFPB's policy process and prolong uncertainty in the marketplace. The new mortgage servicing regulations are set to take effect on January 2014, and the CFPB has already confirmed that the final rule will encompass certain exemptions for smaller servicers, which are defined by the CFPB as firms "that service 5,000 or fewer mortgage loans that they or an affiliate either own or originated." But no matter what's next for the nation's servicers, the most dominant feedback on the CFPB's latest decisions revolves around the idea that the bureau should build six-, nine-, and/or 12-month reviews into all evolving regulations, making it mandatory to take a look back and evaluate the rules' impact. Thus, the industry and lawmakers can work together to ensure that important objectives are being met. Not to mention that greater oversight and collaboration might help both parties avoid additional speed bumps. The M Report | 49 se c on da r y m a r k e t Mortgage servicers responded to new mandates from the government bureau, as leaders from all sectors of the industry braced for the onslaught of new regulations. a na ly t ic s CFPB Trains Sights on Servicers

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