Motley: ‘We Must Look to Future of Servicing’

ORLANDO–Mortgage Bankers Association Vice Chairman J. David Motley, CMB, said the mortgage servicing industry has a “unique opportunity” to move forward.

“We have helped millions of borrowers move forward through the financial downturn. Now it’s time for us as an industry do the same,” Motley said. “We are still overcoming some obstacles and remain committed to helping those borrowers still in need. However, now we must look to the future of servicing–for the health of the market, the growth of our business, but most importantly the service we provide our customers.”

Speaking here at the MBA National Mortgage Servicing Conference & Expo, Motley–president of Colonial Savings FA, Fort Worth, Texas-said new regulations from the Consumer Financial Protection Bureau have made mortgage servicing an even more complex business.

“In the CFPB, we have a new regulator with unprecedented oversight authority,” Motley said. “The agency has instituted thousands of pages of regulations that affect the way we do business every day. Implementing the servicing rule’s requirements required system changes and staff training which had an incredible impact on our business operations and bottom line.”

Motley reiterated MBA’s commitment that every consumer is entitled to quality customer service, timely communication and a fair hearing if they fall behind on their mortgage payments. “That’s why we’ve worked with policymakers to improve regulations so we can ensure the best quality service to our customers now and well into the future,” he said. “Most recently, we worked with the GSEs–Fannie Mae and Freddie Mac–for a reduction in compensatory fees through both extension of the timelines and raising the minimum invoice threshold.”

Motley noted duplicative and overly burdensome state regulations are presenting new layers of complexity for servicers and consumers. He cited MBA’s work with the Conference of State Bank Supervisors and FHA in minimizing regulatory burdens to make servicing less costly and more efficient.

“We have come a long way and have been largely successful because of our common goal,” Motley said. “Industry, policymakers and consumer advocates all want to provide consumers with quality loan servicing. We want a strong servicing market that allows us to do business and works well for consumers.”

Motley said mortgage servicers have a “unique opportunity” right now to think about the future. “Mortgage delinquencies are low; home interest rates are still low,” he said. “We are nearing the end of the effects of the economic downturn, but we cannot forget that some consumers are still struggling. We’ve helped millions of borrowers and want to continue helping those who still need it…With the housing market performing well and on the upswing, now is the time for the servicing industry and stakeholders to do an overall assessment of the industry. Servicing has become more expensive and much more complex these past few years. We want a system that allows us to serve our customers. To achieve this, servicing regulations must continue to evolve and we must remain engaged with regulators to help them get it right.

Motley noted loss mitigation as an example of how the industry has engaged. “We have made progress with the GSEs lowering their compensatory fees–an excellent step, but timelines should be continually re-assessed and updated to reflect both what constitutes good performance and the realities on the ground,” he said. “FHA is also continuing to work on improving their loss mitigation processes. Another positive step that will, if done right, encourage more lending to the low-to-middle- income and first-time homebuyers that FHA was created to serve.”

Looking ahead, Motley said MBA will work with the Federal Housing Finance Agency and the Treasury Department in moving forward beyond the Home Affordable Mortgage Program and the Home Affordable Refinance Program, which expire this year.

“What will life be like after HAMP? Will there be a government administered replacement? There are many borrowers with trial modifications on the horizon and some can even still apply through the end of the year. During this wind-down period we should work with Treasury on the path forward,” Motley said. “The time is now to work together – industry, policymakers, stakeholders and consumers–to develop a strong servicing system that provides the best customer service to our borrowers and continues to help those that are struggling to retain their homes.”

Motley said it’s also time to look at the business of servicing. “It’s time to look five, 10 or even more years ahead,” he said. “Each of us does this with our personal careers, our own businesses, so why not do it with government policy? We must leverage our experience as an industry to work with stakeholders and develop the path forward together. Servicing–done right and well–provides a real value proposition to investors in addition to being a necessity for borrowers. We need to make sure that incentives in the market reflect this by rewarding good loan servicing and ensuring a deep and liquid market for servicing buyers and sellers.”

Beyond the lame duck 2016 Congress, Motley said the servicing industry must play the “long game” and work to influence the housing dialogue with Congress as windows of opportunity emerge, such as omnibus legislation or must-pass vehicles.

“Regardless of who wins the elections, we need to work collectively to create common sense, centrist proposals,” Motley said. “No matter who controls the Senate in the next Congress, anything that passes still needs 60 votes, so proposals must have bipartisan appeal.”

Motley noted the National Flood Insurance Program will come up for congressional reauthorization next year. “The NFIP has served–and will continue to serve in the foreseeable future–a critical need in helping homeowners protect one of their most valuable assets. NFIP has been vital to communities across the country that have struggled to rebuild after major flooding events. But there is also no doubt the NFIP–now $23 billion in debt–must be reformed. The program, as currently structured, is not sustainable. The federal government cannot and should not bear the full burden of post -disaster recovery and rebuilding.”

Looking ahead, Motley said MBA will work with regulators on the following issues:

–Ensure that future loss mitigation programs are developed in a thoughtful manner so they can be employed during the next credit down-cycle.
–Reduce regulatory overlap, duplicative or contradictory regulations, each of which lead to confusion.
–Work with CFPB to fine tune their amendments to the servicing rule and help the industry implement them when they are released later this year.
–Ensure that regulation doesn’t pick winners and losers by business model. “Regulation should set standards that allow for innovation and creativity, governed by sensible regulation, in the servicing space,” Motley said.

“We can decide right here, right now, to have a positive influence on the future of servicing,” Motley said. “We can continue to be part of the solution for borrowers working with regulators and legislators. We can choose to be a part of the strategy team that sets our industry and consumers on the path for long-term success. We can decide to work with all stakeholders to ensure a liquid, safe, reliable servicing system five, 10 or more years down the road.”