The inspirational movie Lean On Me featured Academy Award winner Morgan Freeman in the role of principal Joe Clark, a no-nonsense reformer and disciplinarian who turned around a failing inner city school. His first day on the job, Clark held an all school assembly in which he expelled the worst “students” en masse and told the remaining kids what he expected from them if they wanted to avoid the same fate and, more importantly, actually succeed at school and life. Needless to say, his expectations were high and uncompromising, and his actions drew protests from students, parents, faculty and the school board.
For those involved in mortgage servicing, the story of Joe Clark might bring to mind CFPB director Richard Cordray. If there was any doubt about his expectations for the industry, the release of the CFPB’s Supervisory Highlights in late August made them perfectly clear: he expects the rules to be followed. Announcing publication of the report in a press release titled “CFPB Examiners Find Mortgage Servicing Problems at Banks and Nonbanks,” Cordray said:
“Our examinations of banks and nonbanks allow us to correct problems before more consumers are affected. Today’s report highlights both the mortgage servicing problems throughout the industry and the challenges of making sure that nonbanks are following federal law. Fixing both is a priority for us.”
The report focuses on three areas of particular concern:
- Sloppy account transfers
- Poor payment processing
- Loss mitigation mistakes
Detailed within each of these are problems the CFPB examiners found with how servicers are communicating with borrowers. For example, failing to tell consumers when the servicing of their loans was transferred from one company to another and inadequate notice to borrowers of a change in address to send payments, which resulted in late payments. And, given their focus on helping distressed borrowers avoid foreclosure, the CFPB was most disappointed in the communication with borrowers in loss mitigation, citing:
- Inconsistent communications with borrowers, giving them conflicting instructions for loss mitigation processes;
- Poor procedures for requesting missing or incomplete information from consumers, making it difficult for consumers to provide the correct documentation; and
- Deceptive communications to borrowers about the status of loan modification applications, leading some consumers to faster foreclosure.
With the January 2014 implementation of the CFPB’s revised mortgage servicing rules fast approaching, time spent on improving borrower communications in these and other areas will go a long way to keeping servicers out of their new principal’s office. That’s why the Mortgage Bankers Association and Varolii are inviting you to attend a webinar Wednesday, September 18 at 1:00 PM Eastern time. In addition to getting chapter and verse on the CFPB’s rules impacting borrower communication, you’ll learn how you can comply and also:
- Lower your rate of first payment default on servicing transfers
- Shorten the cycle time on hazard insurance discovery
- Reduce the flow of accounts to serious delinquency
- Increase the ratio of loans to relationship managers
Please plan to join me on the 18th if you want to hear more.