You Deal With It

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cover story be insignificant." The Wingspan SVP did note, however, that during the 2013 MBA Annual Conference in Washington, D.C., in late October, CFPB director Richard Cordray verbalized a more mollified M.O. as long as lenders and servicers make a good-faith effort to comply with the new rules. Using the terms "appropriate" and "evenhanded" to describe the CFPB's oversight and enforcement duties with regard to the housing finance market, Cordray offered the following to conference attendees, "We are engaged in vigorous outreach and assistance to financial institutions. We view this as a joint enterprise, and we are interested in learning how we can make things go more smoothly and achieve better results. It is not good enough for us to take the view that once these new rules are published, our work is then done and we can say to financial institutions that 'it's your problem now.'" Alkire told MReport, "The CFPB has hinted at some degree of flexibility regarding compliance when a company makes a good-faith effort to comply, but how strictly the rules will be enforced remains to be seen. What we do know is that the CFPB has refused requests by a number of industry groups to formally extend the deadline for compliance." Morris broached harm to the borrower as another key criteria that should be weighed heavily by the CFPB in its deliberations on the severity of penalties for noncompliant mortgage servicers. In other words, the hope would be that a technical violation of the rules with no serious impact on the borrower would warrant a lighter penalty. The CFPB's periodic rule changes and updates have kept legal and compliance departments at mortgage companies scrambling in 2013. Sure, the bureau's amendments address servicer concerns about the process, but they then trigger further adjustments. 18 | The M Report "A significant challenge is the velocity of changes including those made in September and October," Morris said. "Most changes require changes to the people, process, and technology necessary to implement these changes. While expanding on these rules helps servicers become better informed on the regulations and therefore increase home retention, they will take time to execute." Bureau representatives, while acknowledging the vigilance required in the constantly evolving buildup to January's rule clarifications and amendments along the way. It's also been an "open, inclusive, and transparent" process or at least planned that way by the bureau in how it has reached out to all stakeholders for input: consumers, advocates, industry members, and public officials. So how prepared are servicers for the big January deadline? Younger companies launched in the rough and tumble of 2008 and beyond may have an advantage, their rigorous trial by fire at inception allowing them to fine-tune instead of overhaul. "The CFPB has hinted at some degree of flexibility regarding compliance when a company makes a good-faith effort to comply." —John Alkire, Carrington Mortgage Services rules implementation, do maintain that much of the writing was on the wall, dating back to the National Mortgage Servicing Settlement adopted in 2011 and Dodd-Frank itself in summer 2010. Roadmap to Regulations P reparing for the CFPB's implementation of the lending and servicing rules has been a long and winding road for financial institutions—see the "vastness and newness" of the regulations, as Morris put it—one not without a number of "Since we are a relatively young company, we had many of the new requirements in place," Shiller said, which began as a special and component servicer working on defaulted loans and portfolios. "Single point of contact (SPOC) and quick response times to customer inquiries were all part of our initial business proposition." A cutting-edge, centralized data warehouse design helps the Carrollton, Texas-based firm achieve the transparency and efficiency needed for compliance. Putting the service in servicing, Morris said Fay's SPOC system has allowed the company to react faster and more intelligently to distressed loan situations. A helping (and human) hand available to the borrower throughout the loan process cannot be overstated. "Having the foundation of a servicing company built on staff with strong relationship skills is something that makes implementing these regulations that much easier," Morris added. "Fay Servicing also uses a unique staff model in which we only hire college-educated ex-originators to be servicing account managers. While technology can assist with workflow, nothing can replace well-trained people effectively interacting with borrowers to solve their problems and keep them in their homes." As one of the largest purchasers of non-performing loans in the country, Carrington Mortgage Services knows distressed servicing quite well. The company's "high touch" systems are designed to handle the range of mortgage exceptions. "What is actually gratifying for us is that many of the new regulatory requirements mandated by various local, state, and federal entities essentially mirror the processes we've already had in place for some time and have been regularly using in our day-to-day business," said Alkire, who emphasized the importance of integration given Carrington's 16 separate companies plus thirdparty vendors. "Knowing what works is the first step in establishing best practices in this new era of more stringent regulation." The CFPB has provided templates for the servicers' implementation of new requirements regarding the verbiage and presentation of customer notifications and letters.  Positive Path with a Few Bumps Along the Way A s with any sweeping policy change, unintended consequences are usually unavoidable.

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