MReport April 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

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28 | TH E M R EP O RT FEATURE that promote mortgage servicing market liquidity, continuing to advance the borrower experi- ence and improving servicer efficiencies. Addressing evolving product options, including tool- kit modifications, will continue to impact rules and workflow. Other modest changes recently issued by the GSEs include the capped maximum reimburse - ment threshold on insured loss repair inspections, the removal of requirements to report dam- ages after an uninsured loss event, re-aligned loss event policies, and reduced loan file retention timeframes. The Future of the CFPB A t the Consumer Financial Protection Bureau, changes in governance, administration, and oversight authority are in play. The outcome of the CFPB, amendments to the Dodd-Frank Act, and corresponding rollback of regulation could significantly test servicer operational endurance this year. There are several initia - tives that fall into this basket: • how to automate the nu- ances of loan payments posted pre- and post-bankruptcy petition; • how to ensure accurate ac- counting of property tax pay- ments from escrow accounts in scenarios where real estate property tax payments were made directly by borrowers trying to circumvent the new cap on tax payment deductions; • and what will come of respons - es to CFPB Acting Director Mulvaney's press release, announcing solicitation for "Request for Information (RFIs) seeking comment on enforce - ment, supervision, rulemaking, market monitoring, and educa- tion activities" of the CFPB. Mulvaney is also considering how mortgage rule look-backs, established in Dodd-Frank to extend the CFPB authority to "modify, expand, or eliminate" rules, can be used to redefine QM, expanding loan parameters that fall under this designation, and likewise safe harbor and ATR compliance. Last but not least, mortgage servicing guidelines introduced by the CFPB in 2014 established default parameters supporting early intervention, communication criteria, loss mitigation processes, forced-placed insurance and bor- rower "assertions of error and requests for information." Industry trade associations have suggested amending or replacing the servic - ing rule with new rule(s) that "preempt more restrictive state laws" to achieve better alignment and consistency between loss mitigation and foreclosure require - ments set forth by states versus those of the CFPB. Shifting MSRs O n the premise of rising interest rates and renewed consideration of mortgage servicing rights as a hedge, the handful of big bank servicers that withstood escalating regula- tory burden and costs to service are now unloading servic- ing. The appetite for servicing is migrating toward regional banks and non-bank servicers. This environment will increase transfers of servicing and fur - ther strain servicer operational processes, as the industry strives to simultaneously digest regula- tory modifications and reduced investor requirements, epitomiz- ing the potential for regulatory and operational disruption to stifle advancements in servicing technology and innovation. Tech to the Rescue D espite the servicing indus- try's resiliency and growing aptitude for modernization, it is difficult to confirm that the current technical infrastructure is ready for deregulation and further disruption to operational practices. Mortgage servicers have withstood a decade of exponential regulation, the development of complex loss mitigation alternatives and fluc - tuating waterfall processes, not to mention enduring fines, false claim penalties, and enforcement action. In the face of this, they have either triumphed or ex - pired from exhaustion. Survival and the capacity to prepare for post-crisis expansion will be largely contingent on flex - ible operational workflow and workout processes that ensure servicing system platforms and integrated solutions can handle the forthcoming decoupling and disappearance of complex busi - ness rules. Of equal importance, mortgage servicers need to be positioned to meet implemen- tation timelines and bear the continued increase in costs to service. Whether responding to deregulation, regulation, investor changes or the ebb and flow of servicing transfers, the key to succeeding in this environment will hinge on innovative servic - ing workflow technology. JANE MASON is the founder of Clarifire, CEO, and the original intellectual architect of an innovative multi-dimensional workflow solution that transcends numerous industries called after the same name, CLARIFIRE. These industries include financial services, healthcare, and enterprise workflow. Mason has grown her company over the past decade into a thriving SOC 2 Type II software-as-a- service provider. "Despite the servicing industry's resiliency and growing aptitude for modernization, it is difficult to confirm that the current technical infrastructure is ready for deregulation and further disruption to operational practices."

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