Mortgage servicing requirements have changed quite a bit over the years and there are likely more changes on the horizon. Not only have we seen an increase in regulatory requirements, the focus on fair lending and UDAAP has also greatly increased.
For some of these requirements, institutions rely largely on their systems. While that’s fine and often necessary, it’s imperative that those systems are periodically tested for accuracy. There’s also the fact that, at least when it comes to actions such as potential foreclosure, that other key players like your institution’s legal counsel are aware of the prohibitions as well.
A recent Consent Order demonstrates how complicated mortgage servicing requirements can be and how much trouble they can cause. Some of the issues that resulted in this Consent Order included:
- Late fees were improperly calculated and charged. This is an issue that lately we’ve heard of more and more. It doesn’t matter if the actual charge is what you intend it to be if your Note (i.e., your contract with your borrower) describes the charge inaccurately. You also need to make sure the timing of any late fee lines up with the language of your Note. Additionally, if you provide periodic statements, coupon books, etc., any late fee(s) need to be described accurately there too.
- PMI was not terminated in a timely manner for numerous reasons, including the failure to accurately recalculate the termination date after loans were modified.
- Unearned PMI premiums were not accurately calculated and refunded within 45 days of termination.
- Escrow account statements did not accurately reflect the scheduled PMI termination date and continued to require PMI premiums.
- Several shortcomings concerning loss mitigation practices and foreclosure actions were also noted. Many were a result of not following the appropriate wait times for initiating or proceeding with foreclosure.
There is a lot to consider with the various mortgage servicing requirements.
Published
2024/09/05
