A
Have
Expectations
Changed?
The nature and
complexity of issues
makes the process
of remediation more
difficult particularly
for big-ticket issues,
such as fair lending
and UDAAP.
37
40
45
60
71
65
RESPONDING TO EXAMINATION
FINDINGS
MAY–JUNE 2014 | VOL. 35 | NO. 3
Regulators
Watch for
Discrimination
by Servicers
F;;; S;;;;;;;;
22 | ABA BANK COMPLIANCE | MAY–JUNE 2014
Regarding the 2013 Dodd-Frank
Mortgage Servicing
Regulations
Under these circumstances, the servicer will on occasion miss
the five-day deadline for acknowledging the inquiry, and possibly
even the 30-day deadline for providing a substantive response,
thereby leading to a rash of claims from borrowers for violation
of the regulations. Even if the servicer designates a specific address
for these types of borrower inquiries, the servicer still needs to
put adequate personnel and procedures into place to handle the
requests. Otherwise, the servicer could find itself in a position
of missing the short deadlines imposed by the rule, which could
lead to a series of claims by borrowers and result in litigation.
Challenges Specific to Notices of Error
The term “error,” for purposes of notice of error submissions, is
broadly defined. While the regulation lists specific instances of
error for which a borrower could properly identify in a notice
of error, a catch-all category ensures that identification of “[a]ny
other error relating to the servicing of a borrower’s mortgage loan”
is covered. Accordingly, the regulation provides little limitation
on the scope of notices of error.
Fortunately, the regulation does carve out certain types of notice
of error that do not require a substantive response, including a
duplicative notice of error, an overbroad notice of error, and an
untimely notice of error. Though litigation could arise over what
constitutes an overbroad notice, servicers do have some protection
me inquiries.
Lender Responsibility
W
further amended the mortgage rules on Sept. 15, 2013 and Oct. 1, 2013. The
result is a super regulation that adds entirely new provisions addressing,
among other industry topics, mortgage servicing.
Most of these regulations became effective on Jan. 10, 2014, and undoubtedly create challenges for mortgage lenders and servicers. Here is a
rundown of the rules that will present particular issue.
information the borrower can request, as long as it is “with respect
to the borrower’s mortgage loan.”
Upon acknowledging a request, the servicer must respond in one
of two ways. Specifically, the servicer may provide the information
requested and the appropriate contact information for further
assistance. Or, the servicer may conduct a reasonable search for
the requested information and provide the borrower with written
notification that the requested information is unavailable, the basis
for its unavailability, and contact information for further assistance.
A response thatthe information is unavailable might be appealing,
but it could be subject to challenge later. Therefore, if the servicer is
able to find the requested information, it should go ahead and provide
it in order to avoid a claim of failure to comply with the request.
The regulation carves out certain requests for information
that are not covered, including duplicative requests; requests for
confidential, proprietary, or privileged information; requests
for irrelevant information; overly broad or unduly burdensome
requests; and untimely requests.
Section 1026.36 – Payoff Statement Requests: The new regulation requires an accurate pay-off statement be provided within a
reasonable time upon receipt of a written request. The new provision applies to loans secured by a dwelling, including a HELOC.
Typically the CFPB interprets seven days from receipt of the
request to be a reasonable time. However, under certain appropriate circumstances, the “reasonable time” can be extended from
the seven-day baseline. (Such circumstances arise when the loan
is in “bankruptcy or foreclosure, the loan is a reverse mortgage
or shared appreciation mortgage, or because of natural disasters
or other similar circumstances.”)
Section 1024.37 —Forced Placed Insurance: The new regulation
hat a servicer will not be able to force-place insurance unless
s a reasonable basis to believe the borrower has failed to
in required property insurance. If the servicer force-places
To qualify as a notice of error from a borrower, the notice
must be written; be submitted to the servicer; assert the error the
consumer believes to have occurred; and include the name of the
consumer and enough information to identify the consumer’s
mortgage loan account.
Similarly, a request for information from a borrower must be
written; include the name of the borrower; include information
enabling the servicer to identify the borrower’s mortgage loan
account; and state the information the borrower is requesting
with respect to the borrower’s mortgage loan.
“A servicer doesn’t need to treat
a request on a payment coupon,
other payment form supplied by the
servicer, or a request for payoff balance
as a request for information.”
states t
there i
mainta
THINKSTOCK
BY DAVID A. ELLIOTT, NICHOLAS S. AGNELLO, AND SETH I. MUSE
28 | ABA BANK COMPLIANCE | MAY–JUNE 2014 MAY–JUNE 2014 | ABA BANK COMPLIANCE | 29
Practical Risk
Management Strategies
IN SEPTEMBER 2013, A NEW JERSEY–BASED BANK WITH ASSETS OF $118 MILLION
w
a
p
i
o
$
w
t
p
e
t
t
■■ ■
■■ ■
■■ ■
b
(
s
t
p
i
t
w
d
y
R
A
A
y
r
p
y
Your institution’s product and service
business analysis should include
consideration of the risk associated
with services or products provided or
supported by a TPPP or TPSP.
✂
16 | ABA BANK COMPLIANCE | MAY–JUNE 2014
8 | Responding to Examination Findings: Have Expectations
Changed?
Banks now encounter a new era in examination management.
This era is marked by continuing regulatory uncertainty,
economic instability, and heightened expectations from
prudential regulators. After surveying community and large
banks, bank regulators, and other compliance professionals
about examination management, it appears these factors
make the landscape much more challenging.
BY SCOTT ALMY, BONITA JONES, AND JOHN PODVIN
16 | Third-Party AML Programs: Practical Risk Management
Strategies
In recent enforcement actions, the financial institutions failed
to recognize the risk associated with thousands of transactions
processed through a customer’s depository accounts.
Ultimately each institution, failed to properly monitor
the effectiveness of third-party controls over anti-money
laundering activities conducted on behalf of the financial
institution. But there are ways to avoid the pitfalls associated
with working with these third-party service providers.
BY DAN HUSTON
22 | Fair Servicing: Regulators Watch for Discrimination by Servicers
In October 2013, regulators reminded loan servicers that
they are subject to fair lending liability and must manage
their fair lending risks. The regulators’ message concerning
“fair servicing” risk has been repeated recently. Given the
heightened regulatory attention to this issue, servicers
should develop or enhance proactive risk mitigants,
including preventative and detective controls.
BY BENJAMIN P. SAUL AND DANIEL ZYTNICK
28 | Lender Responsibility Regarding the 2013 Dodd-Frank Mortgage
Servicing Regulations
When Congress passed The Dodd–Frank Wall Street Reform
and Consumer Protection Act in 2011, it amended the Truth
in Lending Act (TILA) and Real Estate Settlement Procedures
Act (RESPA) to dramatically increase the regulation of
mortgage lending and servicing. These regulations will create
challenges for mortgage lenders and servicers.
BY DAVID A. ELLIOTT, NICHOLAS S. AGNELLO, AND SETH I. MUSE
FEATURES
COLUMNS
4 | Compliance
Management
BY CARL G. PRY, CRCM,
CRP
6 | Governance
BY PAUL R. OSBORNE,
CPA, CPO, AMLP, AND
JONATHAN D. LUND, JD
32 | Community
Compliance
JEREMY K. GRAY, CRC,
CRCM, CCBCO
35 | The Other
Side
BY STU LEHR, CRCM
DEPARTMENTS
37 | Regulatory
Developments
Table
38 | At Your
Service
40 | Continuing
Education
Quiz
