Broeksmit: Servicers, Customers Need Consistent Standards

ORLANDO–Mortgage Bankers Association President and CEO Robert Broeksmit, CMB, said the mortgage servicing industry needs clear and definable standards to improve customer service and reduce costs.

“Alignment of servicing standards across loans, investors and guarantors is desperately needed,” Broeksmit said here at the MBA National Mortgage Servicing Conference & Expo. “It’s creating confusion for you and your customers, and increasing your costs.”

In particular, Broeksmit said, different loss mitigation rules for different government programs and from different agencies. “FHA has one set of rules,” he said. “The GSEs have another. And private investors have yet another. The rules can change depending on the borrower’s situation, a new disaster produces a tweak to the protocols. Forbearance for a government shutdown is slightly different than for a flood or fire.”

Last year MBA unveiled One Mod to align loan modification standards (http://www.onemod.org/). This year, working with servicers, MBA catalogued various program requirements and identified what works and what doesn’t. MBA will soon release a white paper containing recommendations for alignment, such as streamlining eligibility requirements for retention and non-retention foreclosure alternatives, and alignment in borrower communication, outreach and engagement standards across investors and guarantors.

During his recent “listening tour” of MBA member companies, Broeksmit noted a number of members said FHA servicing standards are cumbersome, expensive and make it difficult to help borrowers. For example, FHA loan mod requirements still make it hard to provide distressed borrowers the help they need–lower payments–especially when interest rates are rising.

“In addition, servicers must wrestle with three different FHA foreclosure timelines,” Broeksmit said. “And while you’re trying to work cooperatively with the borrower and comply with [Consumer Financial Protection Bureau] guidelines, any hiccup along the way could set off a chain reaction of missed deadlines leading to penalties and curtailment. Adopting a unified foreclosure timeline would make FHA servicing far more efficient and effective, while still holding servicers accountable for minimizing taxpayer exposure. And while a direct conveyance model may be far in the future, we can still make the process better for consumers and lenders along the way.”

The listening tour also revealed servicers’ concerns about excessive capital charges on mortgage servicing assets. He noted at the end of 2018, MBA and others reached out to the federal banking agencies about this, asking them to complete a proposed rulemaking to reduce the punitive risk weight on mortgage servicing assets that was imposed under Basel III.

“The lack of a final rule from the regulators continues to create major capital management problems for many servicers,” Broeksmit said. “Here’s what we want: an increase in the MSR cap to 50% of Tier 1 capital, instead of the proposed 25%; and a significant reduction in the risk weight for MSAs from the current 250%. That’s a higher risk weight than on a portfolio of defaulted loans.

Broeksmit said MBA is making progress. “The agencies want to know more,” he said. So, in April, we’re bringing a delegation of MBA members to Washington to discuss the issue with regulators.”

MBA has also led an effort to standardize and streamline third party law firm oversight responsibilities. This week, MBA launched its Standardized Law Firm Review Criteria. This resource simplifies and streamlines law firm review by establishing standardized criteria, documentation requirements, questions and evaluation methods. “This is the result of a multi-year, collaborative effort by a task force of servicers, auditors and law firms.”

MBA is also addressing disaster issues, Broeksmit said.

“The past couple of years seem Biblical,” Broeksmit said. “If it’s not fire, it’s flood. If it’s not flood, it’s mudslides. And now government shutdowns–a decidedly manmade disaster.

“When you talk to borrowers, sometimes you do get to deliver some peace of mind and personal relief,” Broeksmit said. “Homeowners are thankful to hear when they are eligible for disaster or economic-related forbearance. MBA is working with you and for you to help serve these homeowners. By providing you and homeowners the most comprehensive disaster recovery resources. Such as information needed before and immediately after disaster, emergency services contact information and preparedness guides via our consumer-facing Disaster Recovery Guide in both English and Spanish.”

Broeksmit said extension of the National Flood Insurance Program is more important than ever. “We cannot continue to allow this program to limp along on short-term extensions,” he said. “We are working to secure a long-term reauthorization of the NFIP, while understanding the political difficulties involved.”

MBA also recently convened a summit of experts to begin looking at the entire issue of how climate change is impacting the frequency and intensity of floods, fires and hurricanes, and what this means for homeowners and lenders.

“We have spent a great deal of time and effort generating awareness among policy leaders of the emerging risks and impact to borrowers associated with economic upheavals such as the government shutdown,” Broeksmit said. “We recognized the negative impacts of the government shutdown not only on furloughed government employees and contractors, but also on all borrowers as parts of the government closed and were unable to process claims, answer questions, and provide other basic services.”

During the shutdown, MBA, along with a chorus of others, successfully advocated for FEMA to reverse its decision to halt the issuance of new and renewal flood insurance policies. It also noticed that guidance issued by Fannie Mae and Freddie Mac relating to mortgage forbearance for furloughed workers could have resulted in a negative hit to their credit score. So MBA urged the GSEs to clarify how mortgage servicers should report borrowers’ payment information to make accommodations for those affected by the shutdown, attempting to prevent unfair deterioration in consumers’ credit scores.

Broeksmit urged servicers to remain involved with MBA. “We need you with us, connecting with and educating a new Congress, working with regulators in reshaping policies, reminding them of our shared goal and our shared responsibility of helping borrowers,” he said.