CFPB issues guidance on mortgage servicing transfers

CFPB_LogoThe CFPB issued guidance on Monday advising mortgage firms about their legal obligations to protect consumers during the mortgage servicing transfer process.

“Mortgage servicers should not lose paperwork, lose track of a homeowner’s loss mitigation plans or hinder a consumer’s chances of saving their home from unnecessary foreclosure,” the CFPB said. “The CFPB has a heightened concern about these practices given the large number and size of recent servicing transfers.”

Mortgage servicers collect and process loan payments on behalf of the lender after a mortgage owner sells the right to service its loans or after the owner outsources the loan servicing. While the practice is common, the CFPB said that the transfers can be “logistically challenging” because the transactions involve the transfer of a substantial number of loan documents.

“Through public feedback and its supervision activities, the CFPB has noted a significant number of servicing complications related to the large amount of servicing transfers that have occurred in the last year,” the CFPB said. “In many cases, banks have transferred the servicing of troubled loans to more specialized nonbank servicers. Because the CFPB has supervisory authority over both banks and nonbanks, it is reminding everyone in the mortgage servicing industry to minimize the risks that these servicing transfers can present to consumers.”

The CFPB also said that it would examine how a servicer has prepared for the transfer, how the new servicer handles data received in a transfer and which policies the servicers follow to prevent consumer harm for loans with loss mitigations in process.

“Consumers should not be collateral damage in the mortgage servicing transfer process,” CFPB Director Richard Cordray said. “This guidance directs all mortgage servicers, both banks and nonbanks, to follow the laws protecting borrowers from the risks of such transfers, and makes clear that we will be monitoring them for compliance.”

The CFPB announced new mortgage servicing rules last month that are set to take effect in January. The CFPB guidance is intended to remind servicers to adhere to federal laws, including the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act and rules against unfair, deceptive or abusive practices.

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