Government Agencies Focus on Servicing Compliance, Adaption

ORLANDO–Representatives from federal agencies here at the Mortgage Bankers Association’s National Mortgage Servicing Conference & Expo said changes to mortgage servicing regulations will continue to move forward, even as these agencies try to adapt to the rapidly changing servicing environment.

Allison Brown, program manager of mortgage servicing with the Consumer Financial Protection Bureau’s Office of Supervisory Policy, said the Bureau will continue to focus on implementing the Know Before You Owe (TILA/RESPA Integrated Disclosure Rule, or TRID) and Home Mortgage Disclosure Act rules, as well as setting sights on other rules.

“We’re very aware of the significant challenges you face in complying with these rules,” Brown said. “We will continue to be flexible in recognizing the scope of these changes.”

Brown said servicers still need to improve their compliance with new rules. “We recognize the efforts of servicers who have made real efforts to comply,” she said. “One of the things we’ve seen that helps is a robust audit program…based on any risks that you identify from these assessments, we look to see that you’ve followed through with fixes. The audits serve as a form of measurement that we look at very closely.”

Looking ahead, Brown said the CFPB is expected to issue a final Servicing Rule later this year, focusing on disclosures, early intervention and successors in interest. “We expect to make final decisions within a few more months,” she said. The CFPB is also conducting research for a rulemaking on debt collection practices that will come out later this year, Brown said.

Therese Cere, servicer liaison with the Department of Veterans Affairs, said VA will look at disaster protocols and attorney fee changes, as well as bankruptcy fee changes. She said VA will also look at revamping loan assumption protocols, some of which have not been changed since the 1980s. The VA recently updated its Handbook, last changed in the 1990s.

“We tried to put it in plain English,” Cere said. “Our goal is to help you find things more quickly and more easily and for you to provide feedback.”

Cere said VA holds a biweekly call with servicers to exchange information and feedback. “We want to hear about questions or innovations that you’re doing so that we can assist and adapt,” she said.

Ivery Himes, director of asset management in HUD’s FHA Single-Family division, said the agency is looking to streamlining its loss mitigation processes. “We’ve been appreciative of your efforts to help borrowers stay in their homes,” she said. “We also plan to update or mortgage servicing section of the FHA Single-Family Handbook. We will continue to have a dialogue with the industry to make sure we got it right.”

In the REO space, Himes said FHA updated its REO Disposition protocols and is in the process of updating its Handbook for release later this year. “We felt like the industry would benefit from us having an REO Handbook as a resource,” she said.

The FHA Handbook goes into effect in March. “As we move forward, we envision having quarterly updates and establishment of a governance committee to better communicate updates,” Himes said.

Leslie Meaux, director of monitoring and asset management with Ginnie Mae’s Office of Issuer & Portfolio Management, said Ginnie Mae’s portfolio has reached more than $1.6 trillion, with more than 400 approved issuers. She said Ginnie Mae is looking more closely into the 24 subservicers who are Ginnie Mae issuers, making sure that they meet Ginnie Mae’s portfolio protocols.

“We are absolutely demanding that they have some skin in the game,” Meaux said. “We have actually turned down applicants that haven’t shown the appropriate in-house expertise.”

Many new issuers coming into the Ginnie Mae program are being funded by a hedge fund or other vehicle; Meaux said Ginnie Mae takes time to understand their business models. “It’s really changed from what Ginnie Mae used to be–just banks–to multi-level servicers with a variety of funding sources,” she said. “We’ve taken more steps in how to monitor them; we’re very attuned to the unique risks that some issuers have with Ginnie Mae securities. It ends up being a win-win because we learn more about each other. The change has been very dramatic.”

Each panelist noted their agencies meet together to look at areas where they could align interests more holistically, to reduce red tape.

“We’ve focused on aligning our models with disaster relief, loan modifications and flood claims,” Himes said. “Our feet are being held to the fire because Congress is asking us for accountability.”

“We’re also coordinating with state regulators and lawmakers,” Brown said. “This results in coordinated exams, which we hope results in fewer demands from you.”

Looking ahead, panelists see key challenges for the servicing community. “We want servicers to keep borrowers in their home,” Cere said. “We’re keeping an open mind to see something that fits these particular borrowers.”

“We’re looking hard at what happens when the Home Affordable Mortgage Program expires in 11 months,” Meaux said. “Is there a better mousetrap out there? We’re trying to be very balanced in our approach and very aware of the challenges.”