The National Servicing Standards, outlined in the March 2012 Global Foreclosure Settlement, are difficult to reconcile with the already stringent servicing requirements in place for the Federal Housing Administration’s (“FHA”) single family loan insurance program. The National Servicing Standards are expressly subject to and must be interpreted in accordance with applicable federal, state and local laws, rules and regulations, and the terms and provisions of the requirements, binding directives and investor guidelines of the mortgage insurer, including FHA. In the event of a conflict between such requirements and the National Servicing Standards such that a servicer cannot comply with the National Servicing Standards without violating these requirements or being subject to adverse action, then the servicer must document such conflicts and notify the monitoring committee that the servicer intends to comply with the FHA requirements to the extent necessary to eliminate the conflict. Read More
Force-placing insurance could be a hazardous practice if not done appropriately. The Consumer Financial Protection Bureau (“CFPB”) has made force-placed insurance a main focus of its desired mortgage servicing reforms and new rules on the issue are expected to be released by the CFPB as soon as this week. This is in addition to high-profile investigations into force-placed insurance by New York and California. Therefore, it should be no surprise that a significant section of the March 2012 Global Foreclosure Settlement lays out new force-placed insurance standards for parties to the settlement agreement. Read More
Buried deep in the 40-plus pages of “Servicing Standards” that are part of the recently announced global foreclosure settlement agreement (the “Agreement”) are two bullets on a topic that could impact thousands: tenants’ rights.
Specifically, the Agreement requires subject servicers to: (1) comply with all applicable state and federal laws governing the rights of tenants living in foreclosed residential properties; and (2) develop and implement written policies and procedures to ensure compliance with such laws. Read More
At what point is it appropriate after a borrower defaults to initiate foreclosure proceedings? As soon as the borrower defaults? Few, if any, servicers follow this rule. During a review of loss mitigation options? During a trial modification? Servicers long have felt that the extraordinary delays in completing foreclosures based on some state laws weigh in favor of starting the foreclosure process as soon as possible. Of course, the servicer always can call off the foreclosure if the loss mitigation option succeeds, but a decision to delay the initiation of foreclosures can result in investor claims. On the other hand, borrowers who think they are in the running for a loan modification often are angry and dismayed when the foreclosure notice arrives. The national foreclosure settlement between the country’s five largest residential mortgage loan servicers and the federal government and 49 state attorneys general places a number of restrictions on the controversial but common practice of “dual tracking” foreclosures and loan modifications. Read More
Given the reported violations of the provisions of the Servicemembers Civil Relief Act (“SCRA”) by some servicers, and the attendant enforcement and civil actions against those servicers, state and federal regulators clearly felt compelled to impose significant SCRA-related requirements on the nation’s five largest residential mortgage loan servicers (the “Servicers”) in the recent global settlement agreements (the “Agreements”) entered into between those regulators and Servicers, described here. Read More
By: David A. Tallman
The alleged failure of servicers to adequately supervise the activities of their foreclosure and loss mitigation vendors and other service providers is one of the central criticisms levelled by federal and state regulators against residential mortgage servicers. The regulators assert that skyrocketing foreclosure volumes caused key vendors – including foreclosure firms, bankruptcy attorneys, and document custodians – to take shortcuts. Moreover, with respect to the management and execution of legal documents, regulators assert that servicers failed to adequately supervise the activities of their foreclosure and loss mitigation vendors and other service providers. According to the regulators, servicers were not sufficiently equipped to track the movement of original documents, verify that affidavits and declarations filed in foreclosure and bankruptcy proceedings were factually accurate and correctly executed, or ensure that the vendors otherwise performed their services in compliance with applicable law. Read More
By: Kristie D. Kully
The servicing standards imposed on the five largest mortgage loan servicers by the recent global settlement agreement with state and federal regulators, described here, continue to pile on the “SPOC” requirements. “SPOC” stands for a single point of contact – a knowledgeable and accessible person a troubled borrower may contact to receive information and assistance in the loss mitigation, loan modification, and foreclosure process. SPOCs may do little to resolve the foreclosure documentation irregularities that sparked state and federal regulators to initiate their investigation. However, they have been touted as key to the efforts for national servicing standards, and are an inevitable adjunct to the global settlement agreement.
In many financial service relationships, dissatisfied customers can solve ongoing customer service deficiencies by simply taking their business to a competing provider. Mortgage borrowers, however, are generally stuck with the company that services their loan, unless they are willing and able to refinance. This inability to “fire” loan servicers for poor performance, combined with the fact that mortgage servicing errors can cause serious harm – up to and including the loss of a home – has motivated government officials to impose loan servicing complaint resolution requirements whenever an opportunity arises. Read More
As scrutiny of default servicing practices provided significant impetus for the recently announced global foreclosure settlement agreement (the “Agreement”), it is no surprise that the Agreement prescribes extensive standards to resolve issues with these practices. Based upon the Servicing Standards announced as part of the Agreement, one major area of focus will be the fees that mortgage loan servicers charge in connection with servicing loans. Read More
Whether one thinks the terms of the historic federal-state civil loan servicing settlement are too much, too little or about right, two conclusions are indisputable. First, an incredible amount of good faith effort from all concerned contributed to the final settlement—simply synchronizing the differing interests of the various governmental and private parties in over a year of negotiations seemed to require a computer program. Second, while the settlement terms are likely to contribute to the future housing recovery, the federal and state governments appear intent to continue to pursue enforcement actions for prior conduct.
To view the complete alert online, click here.