Armed with some background on what the Consumer Financial Protection Bureau (“CFPB”) is and does (from my 11-11-14 blog entry), let’s dive directly into the issue of rules. For starters, let’s look into the CFPB’s new rules relating to servicing mortgages.
Here are a few quick background points on the mortgage servicing industry:
- Mortgage originations have been running at more than $1 trillion per year since a peak of $3 trillion in 2006.
- In 2013, numerous mortgage servicers started laying off staff (in part because of fewer delinquencies, higher interest rates, and resulting drop in re-financings) just before the CFPB’s new mortgage servicing rules took effect January 10, 2014.
- As a result, since the new mortgage servicing rules came on line, many servicers have been scrambling to beef up staff and get systems in place to comply with the new rules.
When Dodd-Frank was enacted in July 2010, it transferred rule making authority under both the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z) to the CFPB. The CFPB’s new mortgage servicing rules, titled 2013 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Final Rules, went into effect January 10, 2014. These rules—all 104 pages including the table of contents—can be downloaded from the CFPB’s website. The CFPB has since amended some of these rules and these amendments were published on the CFPB’s website on November 3, 2014.
If you work for a creditor, assignee, or service mortgage loans and have any questions about the new mortgage servicing rules, go the CFPB’s website and review these new rules -www.consumerfinance.gov.
There’s a tab on the home page for “Law and Regulation,” and you’ll find these rules there, listed in reverse chronological order under “Final Rules Issued By The CFPB.” Keep in mind that these rules apply to “mortgage loans” – loans to consumers secured by theirdwellings. If you’re a smaller institution that services mortgages, check to see whether you fall within the “small servicer exemption.” But understand that the small servicer exemption exempts qualified servicers from having to comply with some of the rules, not all of them.
Servicers need to understand that these rules are in effect now and have been since January. If there’s any question about whether the CFPB is enforcing these new rules, go to the CFPB’s website where you’ll see that on September 29, 2014 the CFPB took action against Michigan-based Flagstar Bank for violating the rules by, according to the CFPB, “illegally blocking borrowers’ attempts to save their homes.” Flagstar was ordered to pay $37.5 million, $10 million of which is a civil penalty. CFPB Director Richard Cordray was quoted as saying:
“[t]he Bureau has been clear that mortgage servicers must follow our new servicing rules and treat homeowners fairly. Today’s action signals a new era of enforcement to protect consumers against the cost of servicer runarounds.”
A copy of the consent order from the Flagstar case, detailing the particulars and alleged violations, can be downloaded from the CFPB’s Web site.
More on the CFPB’s new rules, including the new mortgage servicing rules, the Flagstar case, and related cases in upcoming entries. For now, know that the CFPB’s new mortgage servicing rules are in effect and being enforced—and in the case of Flagstar--at a steep cost for violations.