The continued effect of COVID-19 on mortgage servicing rules
Writing this in March 2023 has me reflecting on where we all were in March 2020.
At that time, the NBA season was just canceled and I was talking with friends about this new virus that was suddenly becoming less a conversation piece and more something taking over our world. Everything was in a constant state of instability — from the health of loved ones and concerns about what could happen to how much my job would be impacted by the changing regulatory environment surrounding financial institutions.
Some of those changes remain. Recently, the Office of the President published a notice continuing the COVID-19 national emergency through May 11, 2023.
This announcement was not a surprise; however, it does represent an opportunity for financial institutions to revisit how this national emergency has impacted their operations and those they serve.
Mortgage service violations
Mortgage servicing is one area in which financial institutions have seen large changes and where regulators have expected additional tools to be used to help homeowners.
The Consumer Financial Protection Bureau (CFPB) noted that mortgage servicing violations were a focus in their report on legal violations identified during supervisory examinations.
Specifically, the CFPB supervisory highlights cited violations related to:
- Charging sizable phone payment fees when a consumer was unaware of them.
- Failing to process CARES Act forbearance requests.
- Unfairly charging some consumers fees while they were in CARES Act forbearances.
- Failing to maintain policies and procedures reasonably designed to properly evaluate loss mitigation options.
- Providing deceptive misrepresentations regarding how to accept deferral offers after forbearance and how to enroll in automatic payment programs when entering a deferral.
Keeping your organization in compliance
Financial institutions have put in extra effort to assist their borrowers over the last three years. This effort did not go unnoticed and helped people across the country.
The work continues and with these updates and comments from examiners on the importance of mortgage servicing, now is a great time to revisit your mortgage servicing procedures and training programs to ensure lending staff are up to date.
The COVID-19 emergency has caused mortgage servicing rules to remain in a state of fluctuation due to a barrage of temporary rules since March 2020. Servicers needed to quickly interpret and implement new rules, only to see them expire months later.
If you have not already this year, review your regulator’s examination procedures. For example, the CFPB recently updated their mortgage servicing examination procedures.
The updates cover forbearances and other tools that mortgage servicers have used during the COVID-19 national emergency. Those tools include streamlined loss mitigation options that satisfy the temporary flexibilities in the CFPB’s mortgage servicing rules established by the COVID-19-related amendments.
Take the time to determine the volume of customers in forbearance with extensions expiring and ensure your mortgage servicing department is prepared. Confirm staff training remains up to date and your complaint log does not reflect concerns. If you report to a credit reporting agency, ensure your reporting is accurate.
How Wipfli can help
At Wipfli, we understand that challenges financial institutions face in maintaining regulatory compliance. Our professionals are here to help you develop an effective compliance program and support you as you navigate regulatory changes. Contact us today to learn how we can help you stay confident in your compliance.
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