During the Great Recession courts expressed frustration with sloppy paperwork and borrowers’ inability to get anyone to help them work out problem loans. Many courts refused to allow mortgage foreclosures to proceed because of the perceived mess. The Consumer Financial Protection Bureau just made it clear it was not going to tolerate these problems when it comes to the transfer of mortgage servicing rights.
On Monday, the CFPB issued guidance directing servicers to “make sure consumers are not collateral damage in the mortgage servicing transfer process.” Servicer must be careful when transferring loans servicing rights. The CFPB wants servicers to know that, where appropriate, they will be required to prepare and submit “informational plans describing how they will be managing the related risk to consumers” when making transfers.
One problem that the CFPB is focused on occurs when transferee servicers fail to honor the terms of loan modifications agreed to by their predecessors because the relevant paperwork is not transferred. The CFPB’s mandate: Do not lose the paperwork; keep track of the borrower’s loss mitigation efforts and do not let the transfer process interfere with the borrower’s efforts to stay in his home. CFPB examiners will pay particular attention to the following:
Get ready. This kind of inquiry could easily lead to enforcement actions for the non-compliant.