August 29, 2014
by Wendy Walter
RCO Legal, P.S. – USFN Member (Alaska, Oregon, Washingtn)
On August 19th, the Consumer Financial Protection Bureau (CFPB or Bureau) replaced its February 2013 guidance directed at servicers and related to servicing transfers with Bulletin 2014-01. This new bulletin gets into detail on the recent issues the Bureau has found in examinations of servicers engaged in servicing transfers. The bulletin also discusses application of the new servicing rules in a service transfer situation and outlines a new disclosure process for certain loan servicing transactions.
Findings in recent examinations — Based on recent examinations conducted by the Bureau, it was discovered that servicers failed to properly identify loans that were in a trial or permanent modification with the prior servicer at the time of transfer. Also it found that transferee servicers failed to honor trial or permanent modifications that were offered by the prior servicer. The Bureau is also concerned with finding that borrowers have had to resubmit financial documents to the transferee servicer because the prior servicer did not send the transferee servicer the complete record. These situations are deemed by the Bureau to be in violation of UDAAP (Unfair and Deceptive Acts and Practices) prohibition and if they occurred after January 10, 2014, they potentially violated the requirements for the servicers to have policies and procedures to avoid issues when a loan is being service-transferred. 12 CFR 1024.38(b)(4).
Application of Servicing Rules to Service Transfer Situations — In the non-binding guidance, the Bureau also points out that if there is a service transfer, the transferee servicer might have to comply with the early intervention and written notice requirements again even though the default originated with the prior servicer. This is confusing for a borrower, but it could set the clock back on pre-foreclosure loss mitigation because of a servicing transfer. Another highlight from this section is that the Bureau indicates that its examiners will heavily scrutinize any servicer that takes longer than 30 days from receipt of a complete loss mitigation application at the transferor servicer where the borrower could suffer negative consequences because of the delay.
Disclosure of Service Transfer Plans in “Appropriate” Cases — In certain cases (probably larger portfolio sales), the CFPB will require a servicer to submit plans to the Bureau, prior to the transfer, explaining how it is going to manage associated customer risks. The CFPB, in turn, will use these plans to help formulate a subsequent examination that the Bureau may conduct post-transfer.
For more information, here is a link to the bulletin on the CFPB’s website: http://files.consumerfinance.gov/f/201408_cfpb_bulletin_mortgage-servicing-transfer.pdf.
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