TheMReport — News and strategies for the evolving mortgage marketplace.
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18 | Th e M Rep o RT W hat once was a vibrant industry that thrived on creativity and differentiation from one's competitors, the mortgage servicing industry is now relatively homogenous as servicers attempt to play it safe while adapting to myriad new regulations. From the mid-1990s through the bubble, mortgage origina- tions and servicing followed the path of an unregulated industry, says Michael Wippler, manag- ing partner at the Los Angeles office of Dykema Gossett and former counsel for American Home Loans, based in Santa Ana, California. "If one type of mort- gage started to decline, a new type of loan would be developed. There was a lot of creativity in the mortgages and in the serving." As regulation and risk expo- sure increased and consolidation in the industry occurred, ser- vicers found it much safer to fol- low similar practices so as not to draw the additional scrutiny of regulators or litigators, Wippler continued. Government Intervention M ichael Waldron, partner and practice leader of the mortgage banking group of Ballard Spahr LLP based in Los Angles, California, points to the main drivers of the increasing commonality among servicers as the OCC and Fed consent decrees of April 2011 and the Dodd-Frank servicing rules that became effective January 10. "What we got was a uni- form, maybe burdensome, set of laws applicable for the servicing industry," Waldron said. Though the servicing industry did have some rules before, the latest government laws were more detailed and in-depth than previ- ous rules. The consent decrees (one per servicer) were extremely expensive for the industry. Ten mortgage servicers have agreed to pay more than $8.5 billion in cash and other assistance to borrowers. Beyond the payments, the rulings required servicers to Feature Industry regulations and scrutiny have rendered a once diverse servicing industry into a homogenous group. By Phil Britt Intense Regulations Sow Homogeny Where Diversity Once Flourished