Decoding Compliance

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feature As servicers adjust to additional uncertainty and strive for maneuverability to meet challenging new mandates, what steps can companies and professionals take now to cultivate practices and procedures to survive the industry's seismic cultural shift? E xplaining the organization's recent edicts for mortgage servicers, the Consumer Financial Protection Bureau (CFPB) traded tact for transparency, emphasizing that the rules were designed to "prevent servicer surprises and runarounds for mortgage borrowers." But while enhancing the servicing industry's commitment to, well, service is ostensibly progressive, will the series of strict regulations the bureau released in January really accomplish its stated objective? As of January 1, 2014, servicers will be required to provide borrowers with clear monthly statements, early warnings prior to interest rate adjustments, and early warnings related to "force-placed" insurance, a phrase that the CFPB used more than 450 times in the regulatory documents it rolled out earlier in the year. Additionally, the rules will restrict dual tracking; require direct, ongoing communication with servicing personnel; promote a fair review process; and inhibit foreclosure sales until all other alternatives have been considered. Servicers will also be required to utilize quicker, more efficient processes for noting credit payments and responses to requests for payoff balances; correcting informational errors; and providing access to accurate documentation. Meeting the CFPB's list of directives will require a significant investment for many servicers. They will need to sink resources into everything from technology, staffing, and training to retool policies and procedures. The more difficult challenge for some servicers, however, may be sentiment not strategy. A supporter of the CFPB's goals, if not necessarily its methods, Niket Patankar, Sutherland Global Services' SVP and global head of financial services, noted that, ironically, servicers "generally aren't known for customer service . . . . That element was largely missing until the CFPB stepped in with respect to policy and procedures on what needs to be done to make sure servicers are handling their customers appropriately. The goal and the intention are right—that is, to put the service element back into servicing." Sharing his perspective, Ed Fey, COO of Fey Servicing, emphasized, "These aren't recommendations. These are requirements. Either follow them or get out." With less than a year to cultivate missing elements in their corporate processes, servicers should be considering their business model and choosing the most cost-effective way to accommodate the new regulations. And many companies are meeting the challenge head on, wrestling with complex changes and searching for the right solutions. Arriving at the Crossroads S ervicers agree: The CFPB has gone out of its way over the past year to keep the industry apprised of impending regulations. In fact, the agency has actively tapped servicing companies for feedback so that its final rules would produce the least amount of pain and disruption possible, even sponsoring conference calls with servicers to keep the industry abreast of the bureau's approach to significant issues. "CFPB has been very fair giving us timelines to get things implemented," Fey stated. "It's not like we're told something and, oh, by the way, it was already in process. That happens sometimes with state and local regulations. With the CFPB, it's a matter of following timelines and getting involved in the process." For an industry unaccustomed to a consumer-centric platform, current regulations represent a sea change from business as usual. Servicing mortgages has been a kind of "don't ask, don't tell" business for the better part of the last decade. Servicers, and for that matter the people regulating the industry, really weren't concerned about borrowers' complaints. "Servicing became easy because at 15 percent annualized appreciation, it wasn't hard," Fey said. "You tell someone pay me or sell your house. It wasn't a difficult process." Mortgage servicing might have stayed that way if the housing bubble had not burst. But it did, and lawmakers got busy exposing the industry's underbelly. The result: myriad complaints from borrowers, leading the bureau to issue a direct response to those gripes in the form of aggressive regulatory decisions. In striving to correct past missteps and evolve to meet future challenges, the question on many servicers' minds is "where do you start?" The first step for servicers hoping to survive and thrive in the marketplace: accepting the industry's seismic cultural shift. After achieving the proper perspective, companies can begin shedding old behaviors and retooling business practices through strategic logistics unimpeded by an outdated outlook. Help Wanted B efore CFPB was founded, both regulators and servicers were using old, ineffective technology that had a limited ability to track and save historical data, said Deana Elkins, VP of compliance solutions for ISGN, a Floridabased company that provides mortgage services and technology to lenders, brokers, and servicers. Consequently, tracking almost anything was difficult. "The servicers really didn't provide good customer service with respect to how they were handling customer transactions," Patankar said. Thankfully, help is on the horizon, and when servicers face implementation next year, companies will have enhanced tools to meet standards such as periodic billing statements, showing not only when a bill was sent, but also how it was sent. Upgraded, flexible platforms, preferably programs reflecting The M Report | 31

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