Mortgage Servicers Face Persistent Regulatory, Practical Challenges

ORLANDO–By now, most people in the mortgage servicing industry know that, to some degree, they are defined by the nightmare scenarios that have become fodder for media, regulators and members of Congress.

The veteran whose home was mistakenly foreclosed on; the borrower whose quest to get a simple clarification stretched on for months; the bank-owned home that fell into disrepair, blighting a neighborhood. These anecdotes, true or myth, have in a way defined the mortgage servicing industry and its efforts to mitigate homes in delinquency and foreclosure

“Communications is a key driver of how we work with customers,” said John Harris, senior vice president of operations and default with Bank of Oklahoma, Oklahoma City, here at the Mortgage Bankers Association’s National Mortgage Servicing Conference

Lauren Campisi, an attorney with McGlinchey Stafford, New Orleans, said federal regulations, such as the Telephone Consumer Protection Act, guide mortgage servicers in how they can collect debts. Last year, the Federal Communications Commission adopted a proposal intended to protect consumers from unwanted “robocalls,” but Campisi noted the proposal has an unintended consequence, such as when mortgage servicers provide early intervention with delinquent mortgages.

“This is significant because of the tremendous financial penalties that can occur under TCPA,” Campisi said. She noted the number of TCPA lawsuits filed by the Federal Communications Commission rose from 14 in 2008 to more than 2,000 in 2014, many that involve pre-recorded messages and calls to cell phones, which face tighter regulations.

In February, MBA sent a letter to federal agencies expressing concerns over the proposal, urging them to work with the FCC in implementation of the FCC amendment as to borrower loss mitigation and early intervention efforts. “TCPA interpretations could have a chilling effect on telephone calls for these purposes,” MBA said.

Tobias Moon, partner in the consumer financial services practice group with Akerman LLP, Dallas, noted that language issues continue to be a problem in working with borrowers. “Across the country, we have more than 350 languages spoken in the home,” he said. “More than 57 percent of recent immigrants to the U.S. do not speak English, or speak English well.”

In August 2000, President Bill Clinton signed an executive order mandating improved access to federal programs and activities for individuals who are limited in English proficiency because of national origin. Additionally, the Dodd-Frank Act’s Unfair, Deceptive or Abusive Acts or Practices mandate gives the Consumer Financial Protection Bureau sweeping authority to seek out and punish violations. Numerous state laws provide even more guidance, varying widely in compliance requirements.

Compliance with these orders have proven challenging for mortgage services, both financially and legally, Moon said. “The real issue is that it’s an undefined area,” he sa

“A servicer needs to identify borrowers requiring non-English language assistance, and you have to make it consistent with what you offer English-speaking consumers,” Moon said. “However, these regulations don’t necessarily tell you what documents to translate, and they don’t always provide good guidance as to what you need to do and to what documents you need to change.”

Moon said lack of definitions and clarity provide mortgage servicers with an opportunity to define their own set of best practices. “The real issue is that it’s an undefined area,” he said. “You need to define it for your operations.”

Eric Selk, executive director of the HOPE NOW Alliance, Washington, D.C., a coalition of which MBA is a founding member, said more than half of the consumers they deal with have already been through the process at least once. “We have to work better with these populations, particularly those who are facing imminent default,” he said.

Selk called for clarity across all program and guidelines. “There needs to be consistency,” he said. “Even though there are some differences between programs, we have to push on making them more effective,” he said. “The goal is to meet the customer with their preferred platform so that we can communicate better and lead with value. You’re selling a solution; you’re selling an opportunity.”

Ken Duncan, chief financial officer with the Homeownership Preservation Foundation, Washington, D.C., said borrower often reach out before going 60-plus days delinquent, but struggle to have a meaningful dialogue with mortgage servicers. HBF surveys also suggest that borrowers feel that their contact attempts are not yielding the desired results, and that while servicers are “professional,” a communications gap persists.

“All this points to the need for mortgage servicers to have better communications with borrowers,” Duncan said. He suggested that servicers subscribe to improved communication resources, such as third parties and other connected services.