Real Estate Law

Troutman Sanders LLP: CFPB Will Supervise Real Estate Mortgage Loan Servicing Transfers

By John C. Lynch, David N. Anthon, Jason E. Manning, and Maryia Y. Jones

On February 11, 2013, the Consumer Financial Protection Bureau (CFPB) issued a bulletin (Bulletin) detailing its plans to closely supervise loan servicing transfers and enforce federal and state law compliance in connection with such transfers. The backdrop for this new initiative is the CFPB's concern that transferee servicers frequently fail to honor the terms of trial loan modifications provided by predecessor servicers. This may happen because relevant documents are not transferred to the transferee servicer or the transferee servicer does not take adequate steps to identify mortgages subject to trial loan modifications.

The CFPB's focus areas include:

  • Submission of Informational Plans. In appropriate cases, the CFPB will require loan servicers to prepare and submit informational plans describing how the servicers will be managing consumer risks related to the upcoming servicing transfers. During the course of supervision, examiners will be assessing the policies, procedures, systems, and controls that servicers have established to address such risks. Moreover, examiners will be assessing whether mortgage servicers are adequately staffed and are ensuring that their employees are trained to handle consumer communications in the context of servicing transfers.
  • Enforcement. If the CFPB determines that a servicer has engaged in any acts or practices that are unfair, deceptive, or abusive, or that otherwise violate federal consumer financial laws and regulations, it will take appropriate supervisory and enforcement actions to address violations and seek all appropriate corrective measures, including remediation of harm to consumers.

A copy of the Bulletin is located here. Loan servicing transfers policies and procedures are impacted by the Real Estate Settlement Procedures Act (RESPA), the Fair Credit Reporting Act (FCRA), and the Fair Debt Collection Practices Act (FDCPA), as well as state-specific requirements.

Troutman Sanders' Financial Services Litigation Practice

Troutman Sanders' Financial Services Litigation practice is an accomplished and experienced leader in providing litigation and regulatory advice to a broad spectrum of financial services institutions. The practice is comprised of a dedicated group of trial and regulatory lawyers who focus on resolving the array of issues that confront financial institutions. Its lawyers have years of hands-on successful experience in all areas of the trial process, coupled with in-depth banking industry and regulatory knowledge.

Please do not hesitate to contact David Anthony, John Lynch, Jason Manning, or Maryia Jones if you have questions or would like additional information on the CFPB's Bulletin.

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