The Consumer Financial Protection Bureau issued guidance that mortgage servicers should use to facilitate compliance and prevent harm to consumers during the transfer of residential mortgages.
Since 2014 when significant changes to Regulation X mortgage servicing rules took effect, the CFPB has found weakness in how some servicers manage mortgage transfers, the agency said.
When transferring a loan, servicers should have policies and procedures reasonably designed to transfer all of the information and documents in their possession or control relating to a transferred mortgage loan, such as, a unique identifier for each loan, the terms of the loan, current unpaid principal balance as of a specific date, information concerning any escrow, and copies of any loss mitigation applications submitted by a borrower and of any loss mitigation agreements agreed to with a borrower.
Such actions can prevent consumer harm, for example, ensuring there is no lag in paying the borrower’s taxes and insurance from escrow accounts.
“Consumers should experience a seamless process when their mortgage servicer changes. The guidance we released today will facilitate a well-functioning mortgage servicer transfer process, providing a roadmap for servicers that will prevent consumer harm,” said CFPB Director Kathleen L. Kraninger. “The guidance provides insights the CFPB has gained through years of supervisory and enforcement work to oversee compliance with regulations updated after the financial crisis.”
The CFPB began developing this guidance before the coronavirus pandemic, the agency said, in consultation with interagency and intergovernmental partners. Recognizing the particular challenges that entities may face as a result of the pandemic, if a servicing transfer is requested or required by a federal regulator or by the security issuer of government loans, the CFPB intends to consider such challenges, including operational and time constraints related to the transfer, and to be sensitive to good-faith efforts demonstrably designed to transfer the servicing without adverse impact to consumers.
The CFPB intends to focus any supervisory feedback for institutions, if needed, on identifying issues, correcting deficiencies, and ensuring appropriate remediation for consumers.