On February 11, 2013, in response to the increased volume of mortgage servicing transfers and the potential impact of these transfers on consumers, the Consumer Financial Protection Bureau (CFPB) issued a bulletin to mortgage servicers, both banks and nonbanks, advising them of their legal obligations to protect consumers during loan transfers. The bulletin indicates that the CFPB is particularly concerned about lost paperwork during transfers, service interruptions when loans are transferred during the loss mitigation process, and wrongful foreclosures.
Specifically, the CFPB stated that its examiners will focus on:
How a servicer has prepared for the transfer of servicing rights and/or responsibilities: This will focus on procedures servicers have in place to ensure a smooth transfer of information that does not result in a disruption of services to consumers, as well the plans and procedures of both the old and new servicers to respond to consumer questions about the transfer.
How a new servicer handles transferred files: The CFPB will take a close look at the new servicer’s plans and procedures to ensure that they are providing accurate information to consumers and are identifying any ongoing loss mitigation at the time of transfer, so the consumer does not have to restart this process.
The policies servicers have in place to prevent harm to borrowers with loss mitigations in process: If a consumer has reached an agreement with their loan servicer on a loan modification, these plans should be honored by the new loan servicer.
The CFPB warned that it will take “appropriate supervisory and enforcement actions” if it discovers violations.
The full bulletin is available for review at the CFPB website.