December 2015 - Fortune Tellers

TheMReport — News and strategies for the evolving mortgage marketplace.

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TH E M R EP O RT | 25 FEATURE W hether you've seen the movie version with George C. Scott, Bill Murray or the Muppets (or actually read the novella), everyone knows the story of A Christmas Carol: Ebenezer Scrooge is transformed after a Christmas Eve visit from the Ghosts of Christmases Past, Present, and Yet to Come. It's a theme everyone relates to, particularly during this time of year, when we reflect on the year that's passed and the one that lies ahead. As 2015 comes to an end, we can't help but think about the ser- vicing industry and the significant transformation it's gone through— and will probably continue to go through in the future. The Ghost of Servicing Past O ver the past few years, the servicing industry has faced new rules and standards with the National Mortgage Servicing Set- tlement and the Consumer Finan- cial Protection Bureau's (CFPB's) Mortgage Servicing Rules. There have also been several high-profile settlements, which have resulted in individual servicers paying fines and restitutions ranging from $29 million to $2.1 billion. The new rules and regula- tions have impacted servicers of all sizes trying to stay compli- ant. According to the Mortgage Bankers Association, the cost to service performing loans has risen 164 percent, from $59 per loan in 2008 to $156 per loan in 2014. (Remember: That's for per- forming loans and doesn't factor in non-performing loans.) With the rising cost of servic- ing, it's becoming less and less attractive to service in-house. The alternative—using a sub- servicer—may relieve some of the day-to-day challenges, but it requires oversight. To en- sure compliance, increased due diligence, subservicer checks, and reporting and analysis, transpar- ency is required. The Only Constant Is Change I n November 2014, the CFPB proposed changes to the Mortgage Servicing Rules that encompass important protec- tions for struggling mortgage borrowers, particularly during servicing transfers. Specifically, the proposed rules require a new servicer to comply with the loss mitigation requirements within the same timeframes that applied to the previous servicer. So, if a borrower's loan modification application was completed prior to the transfer, the new servicer needs to evaluate it within 30 days from the date the previous servicer received it. In the case of involuntary transfers directed by courts or regulators with jurisdic- tion, the new servicer is granted at least 15 days following transfer to evaluate the loan modification application. If more information is needed for the new servicer to as- sess the application, the borrower is protected from foreclosure dur- ing that time. In addition, the proposed rules clarify the steps servicers and their foreclosure counsel must take to protect borrowers from a wrongful foreclosure sale, includ- ing restrictions on the use of dual tracking. The rule also clarifies the date of delinquency as the day a borrower fails to make a periodic payment and the ser- vicer's responsibility to apply late payments to the oldest outstand- ing periodic payment, therefore changing a borrower's date of delinquency. All of these new rules make data integrity a vital part of mort- gage servicing rights (MSR) trans- fers now and well into the future. Of course, errors can occur at any stage, which is why most servicers have always handled transfers with a boarding scrub. That is, prior to an MSR transfer, the exiting servicer sends over The Ghosts of Servicing Past, Present, and Yet to Come A Reflection on the History and Future of this Transitioning Industry as the Year Comes to a Close By Susan Connally

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