TheMReport

March, 2013

TheMReport — News and strategies for the evolving mortgage marketplace.

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themreport.com All Eyes on Capitol Hill As federal organizations continued to focus on housing reform in the opening months of the year, MReport's online readers turned their attention to headlines revealing the policies and lawmakers making an impact on the mortgage industry. CFPB Touts Caution for Loan Transfers Reminding servicers that transferring mortgages can be a risky business for homeowners, the bureau warned companies to proceed carefully when repositioning loans. As loans get transferred from one mortgage servicer to another, certain risks can inadvertently be placed on homeowners. So, in light of the heightened number of mortgage servicing transfers, the Consumer Financial Protection Bureau (CFPB) issued a bulletin to servicers and subservicers to remind them of protections for consumers when loan transfers occur. The bureau noted specific concerns from transfers such as loss mitigation plans that get lost, missing paperwork, or hindrances to a consumer's chance of saving his or her home from foreclosure. "If the transfer process is not handled properly, consumers may find that their servicer lost important loss mitigation documents or that the servicer did not credit their payments on time," the CFPB explained in a statement. While transfers can be a positive for homeowners if it means going to a specialty servicer that offers better service, initially, transfers can easily become confusing for borrowers since they have to deal with unfamiliar paperwork, different staff, and new addresses to send payments. The CFPB also announced it is making servicing transferrelated problems a focus and will be scrutinizing servicers in a few specific areas. 10 | The M Report The areas of focus are how a servicer has prepared for the transfer, how the new servicer handles files it receives through a transfer, and what policies servicers have for borrowers with loss mitigation plans in progress. Plans established with previous servicers should be honored by the new servicer; otherwise, consumers are in danger of unnecessary foreclosure as they start the process again, the bureau explained. "Consumers should not be collateral damage in the mortgage servicing transfer process," said Richard Cordray, director of the CFPB, in a statement. "This guidance directs all mortgage servicers, both banks and nonbanks, to follow the laws protecting borrowers from the risks of such transfers and makes clear that we will be monitoring them for compliance." The Federal Housing Finance Agency (FHFA) issued a statement in support of the bureau's announcement. "FHFA shares the goal of improving servicer performance, which will result in better outcomes for both consumers and investors," the agency stated. Breathing New Life into an Old Bill In the Senate, two Democratic lawmakers are seeking to revive previously proposed legislation that would create broader refinancing options for qualified borrowers. Two U.S. senators reintroduced legislation designed to open up competition and limit barriers to refinance for qualified homeowners who are otherwise left without options. Sens. Robert Menendez (D-New Jersey) and Barbara Boxer (D-California) reintroduced the Responsible Homeowner Refinancing Act of 2013 (S. 249), a bill that would allow homeowners to take advantage of low interest rates by reducing or removing certain refinance requirements. "We need to bring much-needed relief now to hard-working, responsible homeowners who are struggling to keep up with their high interest rate loans—including thousands in New Jersey whom I have heard from," Menendez said. "We need to do this before interest rates go up again. It's time that Congress finally put families first and give homeowners who have played by the rules a fair chance to refinance at today's low rates." First, the bill would direct the GSEs to require the same streamlined underwriting and associated representations and warranties for new servicers as they do for current servicers, leveling the playing field for lenders and servicers. The bill would also expand access to low-cost refinances to borrowers with higher equity and would eliminate employment and income verification requirements for eligibility under the Home Affordable Refinance Program (HARP) based on the justification that HARP-eligible borrowers must already be current on their loans and must have demonstrated a commitment to paying on time. In addition, the act would require the GSEs to develop additional streamlined alternatives to manual appraisals, reducing cost and time for borrowers and lenders alike. Finally, S. 249 would also extend HARP by one year, pushing it through to the end of 2014. According to a release from Menendez's office, the bill (which was originally introduced in the 112th Congress) enjoys support from a number of congressional co-sponsors and industry groups, including the Mortgage Bankers Association, the National Association of Realtors, the National Association of Home Builders, and the Center for Responsible Lending, among others. "This bill is a win-win-win," Boxer said. "Homeowners will have more money in their pockets, Fannie and Freddie will see fewer foreclosures, and the housing market and economy will continue building momentum. That's why the Menendez-Boxer bill has such broad support from industry and consumer groups. We should take action on this commonsense plan immediately while interest rates remain low so American families can realize major savings." Are you an origination news junkie? Go to TheMReport.com and sign up to receive MReport news daily! 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