MBA Comments on CFPB ‘Look-Back’ of Servicing Rule

The Consumer Financial Protections Bureau earlier this year asked the real estate finance industry to help it assess the effectiveness of its 2013 Mortgage Servicing Rule. The Mortgage Bankers Association was happy to oblige.

In comments submitted this week, MBA noted the Mortgage Servicing Rule, which amended the Real Estate Settlement Procedures Act by modifying mortgage servicer obligations to consumers, “required mortgage servicers to spend millions of dollars and countless staff hours to come into compliance and it is appropriate to conduct an assessment of the rule, its costs and the resultant market outcomes.”

However, MBA questions the timing of the current assessment. MBA Senior Vice President for Residential Policy and Member Services Pete Mills noted “significant revisions” to the rule still have yet to come into effect.

“These amendments, which are effective on October 19, 2017 or April 19, 2018, put forth some substantial changes to the rules that are expensive to implement and introduce ongoing burdens on mortgage servicers,” Mills wrote. “These changes should not be excluded from the review process and MBA suggests that any final assessment include, at a minimum, enterprise-level implementation cost data and estimates of ongoing compliance burdens. Given that the final report is not ‘due’ until January 2019, we see no reason to omit the amendments to the rule from review and assessment.

The CFPB is required by statute to evaluate the effectiveness of any rule or regulation deemed “significant.” MBA said in addition to specific RESPA objectives identified by the 2013 Servicing Rule, the CFPB review should focus on evaluating the rule against the following objectives:

–“Consumers are provided with timely and understandable information to make responsible decisions about financial transactions;”

–“Consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination;”

–“Outdated, unnecessary or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens;”

–“Federal consumer financial law is enforced consistently, without regard to the status of a person as a depository institution, in order to promote fair competition;” and

–“Markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.”

MBA comments comments on (1) the feasibility and effectiveness of the assessment plan and factual information that might be useful, (2) recommendations to improve the assessment plan and sources of data and (3) recommendations for modifying, expanding or eliminating the rule. Highlights include:

Assessment Plan as Proposed

–Data requests should be reasonable and institutions that choose to provide such data should be masked or anonymized.

–Information should not be shared for purposes beyond the stated rationale of informing an assessment of the rule.

–The CFPB should accept voluntary participation from depositories of assets of less than $10 billion.

Recommendations to Improve the Assessment Plan

–The evaluation must assess implementation costs and the burden of compliance with these rules.

–The final evaluation should be rigorous in how it evaluates “cause” and “effect” stemming from the rule.

— The CFPB’s baseline will likely be determinative to the review and should be shared publicly for input.

Recommendations for Modifying, Expanding or Eliminating the 2013 RESPA Servicing Rule

–The rule should be preemptive to prevent duplication and drive alignment towards comprehensive national standards.

–The rule should loosen servicing transfer successor liability to assist with market liquidity and prevent consumers from being “stuck” with a servicer.

–The rule should expand the timeframe for certain notifications to permit more thorough responses and reduce borrower frustration and confusion.

–The CFPB should review the language used in its model notices and allow servicers to make non-substantive modifications while remaining within the safe harbor.

–The CFPB should expand the small servicer definition. Specifically, MBA urged the CFPB to consider expanding to include more community-based mortgage companies, banks and credit unions that operate in local or regional markets.

“MBA feels strongly that this review should encompass both facets of the CFPB’s statutory mandate: ensuring access to financial markets and that those markets are fair and transparent,” MBA said. “Such an accounting will necessarily involve discussions of the costs required to implement the rule and the effect that such increased costs have had on access to consumer credit. It should also involve an analysis of how CFPB’s enforcement policy interacts with its supervisory role and whether a lack of regulatory clarity in this rule has reduced access to consumer credit.”