Written by Angela Meyster, Senior Regulatory Affairs Counsel
Last week, the Consumer Financial Protection Bureau (CFPB) released a Compliance Bulletin and Policy Guidance(Guidance) for residential mortgage servicers and subservicers to use in evaluating the potential risks to consumers that may occur when transferring residential mortgage servicing rights (MSRs). Of course, for credit unions, such transfers are one way - NCUA prohibits credit unions from purchasing MSRs, but not selling them, in Section 703.16(a).
The Guidance replaces CFPB Bulletin 2013-01, released in February 2013, and serves to inform mortgage servicers that the CFPB intends to review carefully compliance with the revised Regulation X that took effect on January 10, 2014. The revised Regulation X implements the Real Estate Settlement Procedures Act (RESPA) and requires servicers to maintain policies and procedures “reasonably designed to achieve the objectives of facilitating the transfer of information … and of properly evaluating loss mitigation applications.”
The Guidance has four sections. Section A, “General Transfer-Related Policies and Procedures,” gives examples of transfer-related policies and procedures the CFPB may evaluate to determine a servicer’s compliance with revised Regulation X. Section B, “Applicability of the New Servicing Rules to Transfers,” provides answers to frequent questions regarding revised Regulation X and identifies risk areas on which CFPB examiners may focus. Section C, “Protections under Federal Consumer Financial Law,” offers descriptions of the other federal law that may be applicable to transfers of MSRs, as well as the possible consequences of non-compliance. Finally, Part D, “Plans for Handling Servicing Transfers,” alerts entities engaged in frequent MSR transfers that the CFPB may require them to prepare and submit informational plans to ensure that they manage any risks posed to consumers.
The takeaway here is that this is clearly an area to which the CFPB, and, by a function of that, NCUA, are paying attention. If your credit union transfers its mortgage servicing rights you will need to be on the lookout for these issues and should consider giving the Guidance an in-depth read. The Guidance is effective October 23, 2014 and applicable beginning August 19, 2014.
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