Guidance for servicers of residential mortgage loans on transfers of the loans – apparently a long-time bugaboo of the federal consumer financial protection agency – was outlined late Friday by the agency.
According to the Consumer Financial Protection Bureau (CFPB), it has found weakness since 2014 in how some servicers manage mortgage transfers. The agency noted that was the year when “significant changes to Regulation X mortgage servicing rules took effect.”
“When transferring a loan, servicers should have policies and procedures reasonably designed to transfer all of the information and documents in their possession or control relating to a transferred mortgage loan,” the agency said. That information includes, the bureau said, a unique identifier for each loan, the terms of the loan, current unpaid principal balance as of a specific date, information concerning any escrow, and copies of any loss mitigation applications submitted by a borrower and of any loss mitigation agreements agreed to with a borrower.
The agency said, in releasing the guidance, that since consumers do not have a choice with respect to the transfer of servicing, compliance with regulatory requirements is important in risk mitigation and preventing consumer harm.
Having the policies in place, the agency asserted, “can prevent consumer harm, for example, ensuring there is no lag in paying the borrower’s taxes and insurance from escrow accounts.”
Perhaps significantly, the agency insisted that the guidance was developed “well before the coronavirus pandemic.” However, the bureau said, in recognition of the virus crisis, the agency will take into account the challenges the predicament may pose for entities.
“If a servicing transfer is requested or required by a federal regulator or by the security issuer of ‘Government Loans,’ the CFPB intends to consider such challenges, including operational and time constraints related to the transfer, and to be sensitive to good-faith efforts demonstrably designed to transfer the servicing without adverse impact to consumers,” the agency said in a statement.
The agency added that it intends to focus any supervisory feedback for institutions, if needed, on identifying issues, correcting deficiencies, and ensuring appropriate remediation for consumers.
The guidance will become applicable upon its publication in the Federal Register (which, as of Friday, was not yet scheduled).