Decoding Compliance

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feature SERVICING Or ig i nat ion s e r v ic i ng Servicers Sound Off! Tapping servicing professionals for frank feedback on new guidelines, MReport gathered peer-to-peer insights revealing today's key concerns, leading solutions, and emerging strategies as the industry prepares to implement impending regulations. a na ly t ic s By Tory Barringer " While homeowners' accusations weren't exactly shocking—what struggling consumer wouldn't feel unpleasantly stunned when faced with losing their residence?—the CFPB's regulatory reaction contained a few unexpected elements in addition to anticipated components. MReport spoke with servicing and compliance experts to gauge the impact new standards will have on the industry, providing insight into the marketplace's evolution as companies prepare to implement the CFPB's mandates early next year. The Big Picture While last year's servicing settlement steered the industry toward greater accountability, some companies have ground to make up: "For a number of larger servicers in the past year, they've been working toward compliance with the national mortgage settlement. I do see some challenges for the smaller servicers who weren't necessarily subject to the settlement," said Heather Monserrate, consulting manager at Clayton Holdings. That's not to say the new provisions are completely the same as last year's agreement: "There are some nuances with regards to the CFPB versus, say, the California Homeowner Bill of Rights or the national mortgage standards," Monserrate added. She noted each company will have to review its own practices and gauge those nuances. Growing pains will likely be minimal, at least for the bigger players: "I think all the big servicers have been going in most of this direction already. The timing requirements around qualified written requests are very tight now, and no one would have done that to themselves on purpose," said Jeffrey Naimon, partner at BuckleySanders, LLP, a legal firm serving the financial services industry. "In a broad strokes level, I guess I didn't sense a lot of surprises." The smallest servicers (those exempt from certain provisions) have their own obligations to meet: "It seems driven by sheer scale that the smaller servicers, they're working more on a community lending approach where they know their borrowers better because they're a lot smaller," said Martin Frenkel, co-chair of the mortgage litigation and compliance group at Maddin Hauser. While regulatory oversight may not be as extreme, those businesses will still have to keep standards up. Learning Curve Transparency is the word of the day, with "investors positioning themselves to not have a lack of information": "I think we are absolutely headed toward more transparency in servicing. We've seen that sort of crescendo, for lack of a better word, in the last couple years. We've seen it with Fannie Mae and Freddie Mac wanting more insight in what's happening with a loan," noted George FitzGerald, SVP of product management for Lender Processing The M Report | 53 se c on da r y m a r k e t U nwelcome surprises." The short but inflammatory phrase was used by Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), to generalize consumer complaints stemming from servicers' procedures. And according to the CFPB, borrowers' assertions that servicing companies delivered problems, not solutions, prompted the protective guidelines handed down by the organization in January.

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