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.
The March 12, 2012 Global Foreclosure Settlement with the nation’s five largest residential mortgage loan servicers is the most recent example. The Global Settlement documents, described in detail here, include 42 pages of Servicing Standards that, among other matters, prescribe the manner in which servicers must handle customer complaints. Although the Servicing Standards apply directly only to the five settling parties and their affiliates, as a practical matter they are likely to become a compliance benchmark for the industry.
The Servicing Standards require the settling servicers to:
• Adopt enhanced billing dispute procedures, including: a process that allows customers to readily lodge complaints and pose questions (e.g., by toll-free numbers and email); adequate and competent staff to respond to consumer disputes promptly; a dispute escalation process; complaint resolution tracking; and a toll-free number on monthly billing statements.
• Take “all appropriate action” to promptly remediate any borrower account information inaccuracies, including correcting account information and inaccurate credit reporting, and providing refunds or credits.
• Adopt processes for appropriately addressing customer complaints about third party service providers, such as foreclosure firms, law firms and subservicers.
• Designate a management level contact for government officials regarding complaints and inquiries from individual borrowers who are in default and/or have applied for modifications.
• Respond to all such inquiries with a written acknowledgment within 10 business days and a substantive written response within 30 days, and provide relevant loan information to the borrower and properly authorized government officials upon written request.
• Provide Chapter 13 Trustees with a toll-free number staffed by persons trained in bankruptcy.
• Communicate with the borrower’s authorized representatives and government officials acting upon a written complaint filed by the borrower.
The Servicing Standards’ requirements in many ways raise the bar for complaint resolution best practices, particularly with regard to communications with borrower representatives, government officials and bankruptcy trustees. Although implementing these requirements may present administrative hurdles for the settling servicers and others who opt to voluntarily comply, the bigger challenge may be trying to merge the Servicing Standards with other government-mandated complaint resolution requirements.
For example, the Consumer Financial Protection Act requires timely responses to consumer complaints and directed the Consumer Financial Protection Bureau (CFPB) establish a process to facilitate the complaint resolution process. In response to this mandate, the CFPB last fall issued a Company portal manual that spells out a detailed complaint collection, monitoring and response procedure. The CFPB’s complaint response timing requirements are generally more permissive than those in the Servicing Standards, but the response logistics – including the required use of the CFPB’s consumer complaint portal – are more specific and complicated.
Further complicating the issue of complaint response time requirements are the Dodd-Frank Act (DFA) changes to RESPA’s qualified written request (QWR) requirements. Whereas RESPA currently requires a servicer to acknowledge receipt of a QWR in 20 days and respond in 60 days, the DFA shortened the acknowledgment and response time to 5 and 30 days (with a possible 15 day extension), respectively.
Servicers participating in Treasury and Fannie Mae/Freddie Mac HAMP programs also need to contend with the special consumer complaint resolution requirements arising under the Treasury and Fannie Mae/Freddie Mac escalation case requirements (i.e., certain borrower inquiries and disputes related to HAMP denials and program violations). Finally, a number of states have enacted statutes imposing specific consumer complaint response requirements, some of which apply only to state licensees, and others that apply more generally. New York, for example, requires servicers to have procedures and systems to address borrower complaints promptly and appropriately, including a customer service department staffed by trained personnel and a toll-free telephone number or collect-calling service through which any borrower may direct telephone inquiries during regular business hours.
Enhancing customer complaint resolution practices to align with the Global Foreclosure Settlement Servicing Standards may present significant administrative, logistical and technological hurdles. The first part of the job – reconciling the hodgepodge of overlapping complaint resolution requirements applicable to various different entities and aspects of the servicing process – may be one of the toughest challenges.