The Mortgage Bankers Association has sent a letter to the Consumer Financial Protection Bureau (CFPB) that states the agency's proposed rules amending the Truth in Lending Act and the Real Estate Settlement Procedures Act regarding residential mortgage loan servicing need to ‘accommodate borrower needs, balanced with a clear understanding of servicer limitations.’
In the letter, David H. Stevens, the MBA's president and CEO, wrote that it was ‘critical’ for rulemaking to be done properly, and that the CFPB take both borrower needs and servicer limitations into consideration.
‘We appreciate the CFPB's efforts to create reasonable national mortgage servicing standards that will protect homeowners and that attempt to standardize various rules and policies,’ Stevens wrote. ‘In developing servicing standards, we believe it is important to pay careful attention to the cost/benefit of change for both large and small servicers and borrowers. When making changes to the current model we need to be mindful of unforeseen and unintended consequences that could result ultimately in higher costs for consumers, fewer benefits or options to borrowers and reduced access to credit.
‘Almost every aspect of the servicer's business is regulated in some fashion, but no two servicing standards are alike, placing servicers in a position of having to understand and implement extensive and complex requirements,’ Stevens added.
Stevens also urged the CFPB that discretionary servicing items should not be subject to a private right of action.
‘Of particular concern are the default servicing and information management provisions that carry the potential for significant liability for servicers and assignees,’ he continued. ‘While the preamble to the loss mitigation provisions states that the CFPB does not impose a duty on a servicer to offer loss mitigation or to approve any particular borrower for a loss mitigation option, it imposes a private right of action if the servicer fails to comply with enumerated steps. We are concerned that courts may interpret the requirements to go beyond mere process. Allowing for private rights of action for procedural steps also ensures the means to delay foreclosures through claims of factual dispute.’
Furthermore, the MBA chief requested that the small servicer exemption be expanded.
‘The proposed exemption is too narrow,’ he wrote. ‘'Small servicer' should be defined as a company that services $10 billion in residential mortgage loans or less, indexed to overall growth in mortgage debt outstanding. Independent mortgage servicers should be eligible for the exemption. Small servicers should be afforded other relief and alternatives beyond the periodic statement and should be given additional time to comply with the final rules.’