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the latest SERVICING Or ig i nat ion s e r v ic i ng a na ly t ic s Many servicers have a lot of work ahead of them in order to prepare for the January 10 new rules implementation. A fter examining practices from mortgage servicers, the Consumer Financial Protection Bureau (CFPB) found servicing problems such as disorganized account transfers and loss mitigation mistakes, according to a report. The CFPB's report was based on the examination of bank and nonbank servicers from November 2012 and June 2013. "Our examinations of banks and nonbanks allow us to correct problems before more consumers are affected," said CFPB director Richard Cordray. "Today's report highlights both the mortgage servicing problems throughout the industry and the challenges of making sure that nonbanks are following federal law. Fixing both is a priority for us." When pinpointing problems with mortgage servicing transfers, the CFPB identified risks that could lead to missed payments from consumers. Examiners detected such issues as unlabeled and unorganized paperwork, failures from servicers to communicate new servicing transfers to borrowers, and a lack of protocols on how to handle and organize certain documents such as loan modification agreements. According to the report, one servicer did not review any documents that the previous servicer transferred, such as trial loan modification agreements. The report also discovered issues with payment processing. One example provided was of a servicer that did not provide adequate notice on where to send payments after a change in address. When the CFPB alerted the servicer, the company ensured late fees and other negative consequences would not be enforced. Other issues examiners found related to payment processing included excessive delays when canceling private mortgage insurance payments and property taxes paid later than expected, which prevented borrowers from claiming a tax deduction for the year planned. CFPB examiners also noted loss mitigation issues, such as poor communication with borrowers, including conflicting instructions for loss mitigation process, long application review periods, and inconsistency with waiving certain fees or interest charges. The bureau also concluded many nonbanks are in need of reliable compliance management systems to ensure adherence to federal laws protecting consumers. The M Report | 47 se c on da r y m a r k e t Servicing Problems Abound at Banks, Nonbanks