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From Banking and Finance Law Daily, February 20, 2014

Antonakes says CFPB ready and willing to enforce servicing rules

By Katalina M. Bianco, J.D.

Steven Antonakes, Deputy Director of the Consumer Financial Protection Bureau, says he is “deeply disappointed by the lack of progress the mortgage servicing industry has made” in recent years. Speaking before the Mortgage Bankers Association, Antonakes focused on the need for improvement in the mortgage servicing industry, citing the fact that to date one in 10 homeowners remain underwater and two million households are at a high risk of foreclosure.

CFPB background. In his remarks to the MBA, the bureau’s deputy director sketched the evolution of the CFPB, established as a result of the financial crisis, and discussed the bureau’s mission and steps it has taken toward fulfilling that mission. “Our mission, quite simply, is to make markets for consumer financial products and services work for Americans,” Antonakes said. “Above all, this means ensuring that consumers get the information they need to make financial decisions that are best for themselves and their families.”

Consumer complaints. Antonakes told MBA members that one of the five key tools that Congress provided to the bureau was consumer complaint response. Using that tool, the CFPB’s consumer response team has received over 289,000 complaints. While debt collection currently is the largest source of consumer complaints, mortgage complaint volume remains high, averaging approximately 4,900 complaints per month.

Loan origination. The deputy director said that the CFPB’s mortgage origination initiatives “mark a return to traditional mortgage lending.” He spoke of the bureau’s loan origination work as an example of the back-to-basics approach the CFPB has taken in its quest to reform the mortgage industry. This approach includes the bureau’s loan origination compensation rule and the ability to repay/qualified mortgages rulemaking.

Servicing. The bureau’s second back-to-basics approach targets the mortgage servicing industry, Antonakes told MBA members. When it comes to mortgage servicing, he said, consumers “have little choice in the matter.” The deputy director explained, “After a borrower chooses a lender and takes on a mortgage, the responsibility for managing that loan can be transferred to another servicer without any say-so from the borrower. So if consumers are dissatisfied with their servicer they have no opportunity to switch over to another provider.”

Antonakes took note of the fact that since 2007 nearly 6.8 million loans have been modified, but said that despite these advances “too many customers continue to receive erratic and unacceptable treatment.” He went on to refer to this treatment as “continued sloppiness” that is “difficult to comprehend.”

Antonakes said that “to clean up the mortgage servicing market,” the bureau is targeting practices that have given consumers “the runaround.” The CFPB’s mortgage rules, he said, require servicers to treat consumers fairly. “If there was any ambiguity before about how to treat consumers, now servicers know that they must perform basic customer-service functions such as returning phone calls or answering customer inquiries.”

The rules also require mortgage servicers to advise consumers about available options intended to save homes or provide a solution to problems consumers have making their mortgage payments. Servicers also are barred from starting foreclosure proceedings until the borrower has been delinquent for more than 120 days, Antonakes pointed out. If a borrower timely submits a complete application for loss mitigation more than 37 days before a scheduled foreclosure sale, no foreclosure sale can occur until all other options available through the owner of the loan have been considered, such as loan modifications, short sales, and deeds-in-lieu of foreclosure.

Implementation of rules. Antonakes stressed that servicers have had more than a year to implement the CFPB’s rules and that the bureau has worked to assist them in that implementation, providing guidance and plain-language summaries of the rules. When the bureau was made aware of issues with its rules, he said, amendments to the rules and bulletins providing guidance were issued.

Bureau expectations. The deputy director laid out the bureau’s expectations in relation to its servicing rules. In addition to identifying and correcting technical issues, the CFPB expects servicers to:

  • conduct outreach to ensure that all consumers in default know their options;

  • carefully assess loss mitigation applications;

  • pay “exceptionally close attention” to servicing transfers with the realization that the bureau will be doing the same;

  • ensure that the process is seamless for consumers; and

  • turn to force-placed insurance as a last resort instead of “using it as a profit center that feeds off consumers’ distress.”

Enforcement. Antonakes admitted that his “message to you today is a tough one,” and he did not “expect a standing ovation” upon conclusion of his remarks. He strongly stressed that the “fundamental rules have changed forever.” Servicers “must treat Americans who are struggling to pay their mortgages fairly before exercising your right to foreclose,” he said. In conclusion, Antonakes told the MBA that the bureau has “raised the bar in favor of American consumers and we are ready, willing and able to vigorously enforce that bar.”

Waters letter. On the topic of mortgage servicers, Rep. Maxine Waters (D-Calif), Ranking Member of the Financial Services Committee, announced that she has sent a letter to Comptroller of the Currency Thomas Curry and Monitor of the National Mortgage Settlement Joseph Smith requesting “careful scrutiny” of the sale of mortgage servicing rights (MSRs) from banks to nonbank servicers to ensure that these nonbank servicers have the operational capacity to manage the increased volume.

Waters told Curry and Smith that consumer advocates, housing counselors, and other stakeholders have raised concerns about the transfer of MSRs to nonbank servicers from the banks that are subject to the National Mortgage Settlement, the February 2012 agreement between five mortgage servicing companies and 49 state attorneys general. When the MSRs are transferred to entities not covered by the settlement, the underlying loans are not subject to servicing protections afforded by the settlement, Waters wrote. She noted that the CFPB put mortgage servicing standards in place, but said she was “concerned that these standards offer fewer borrower protections than those contained in the Settlement.”

Companies: Mortgage Bankers Association.

MainStory: TopStory CFPB CommunityDevelopment Loans Mortgages

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