On September 29, 2014, the CFPB ordered Flagstar Bank to pay $37.5 million in fines due to what it found to be violations of mortgage servicing rules. These fines include restitution of $27.5 million to approximately 6,500 borrowers who were serviced by Flagstar – 2,000 of whom lost their homes to foreclosure and a $10 million civil penalty to the CFPB Civil Penalty Fund.
In recent news, The Federal Trade Commission found that Consumer Portfolio Services (CPS), a subprime auto finance lender, used a number of “illegal tactics” while servicing customer accounts and attempting to collect on consumer loans. The company will pay more than $5.5 million to settle the charges that affected over 160,000 accounts. According to the FTC’s findings, CPS was found in violation of servicing loans by misrepresenting owed fees, collecting on monies that borrowers did not owe, improper assessment and collection of fees – including making unauthorized debits from borrowers’ bank accounts and harassment of consumers.
Legacy document systems and processes can no longer support the numerous application and underwriting workflows that come with mortgage loan modifications. Further, the industry is struggling with increasing compliance demands, high loan delinquency rates and shrinking loan profitability.
On Wednesday the 3rd of April, The New York Times reported that the Securities and Exchange Commission said that postings on sites such as Facebook and Twitter are just as good as news releases and company websites as long as the companies have told investors which outlets they intend to use.
Today’s mortgage stakeholder is busy. Not just busy, but “crazy busy”. This leads mortgage decision makers to prioritize projects based upon perceived complexity. Priority is given to those issues that - on the surface - seem easiest to fix. This is a completely understandable position, to be sure, but one that tends to make the status quo more intractable every day. Moving forward in the “new normal” of the current mortgage servicing market requires a willingness to be proactive rather than maintain the status quo and hope for overall economic conditions to improve.
Regulation. The word seems in and of itself antithetical to the American spirit of free enterprise, entrepreneurship, and business progress. But any discussion of today’s mortgage industry must start with the changes wrought by the tide of regulation sweeping the marketplace. The White House, Department of Justice, the OCC and the Consumer Financial Protection Bureau (CFPB) are all striving to protect consumers and bring “transparency” to the mortgage process – from origination all the way to loss mit and foreclosure. So what exactly do all the regulations mean?
The traditional “buy/build/repeat” software and bodies approach to addressing many of the issues facing today’s mortgage industry will not work. It’s simply not scalable. More so than ever before, execution is now critical. It’s time to think outside the box, look at new ways of doing business, take calculated risks, and evaluate solutions with an open mindedness not constrained by cost alone.