§1. What’s going on here?

This is a summary of discussion on the “For All Borrowers: Asking for, and Getting, Information” post from August 10 to October 3, 2012. (On that date, the post was closed to further discussion.) It was written by the Regulation Room team. This version is a DRAFT. Please help make sure that nothing is missing, wrong, or unclear. You can propose changes to this version until October 8.

The goal is to give CFPB the best possible picture of the different views, concerns, and ideas that came out during the discussion. This is NOT the place to reargue your position or criticize a different one. Focus on whether anything is missing or unclear, not whether you agree or disagree.

On October 9, the Final Summary will be posted on Regulation Room and submitted to CFPB as a formal comment in the official rulemaking record. (October 9 is the last day of the official commenting period.)

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§2. Oral information requests

Commenters, particularly consumer commenters, were very negative about the proposal to require servicers to respond to oral requests for information – a somewhat surprising response unless starting assumptions about servicer motivation are taken into account. Almost everyone who commented on this proposal had a bad personal experience trying to get information from their servicer. Some of these stories appear in the Periodic Statement and Who is Servicing Your Loan? summary; here are others:

“I have tried ‘over the phone’ a lot. I have heard they have the original note at a time when they were not supposed to have it. I have heard ‘we don’t have the note’ when they were supposed to have it. Very simple questions such as the amount of reinstatement fees have gone unanswered over the phone. In hindsight I wish I would have recorded some of the phone conversations… It took my servicer about 70 days to send a printout with my [reinstatement] fees (not even half the fees were listed). The printout itemized the fees as: ‘ 625 “allowable fees” and $ 750 “mediation fees”’ (we refused to mediate). Well if I was the servicer I would do anything to not give out such crappy itemization, too.” (Consumer who had personal or family experience having hard time making mortgage payments; household with income under $100,000/year).

“[P]rior to my foreclosure, calling the title co. [I was told] only four original loan pages could be retrieved to my loan. Both the local and corporate offices couldn’t find documents to my loan. It wasn’t until after foreclosure did I learn to contact the [D]epartment of [I]nsurance to file a complaint. It was then did I receive some specific loan documents requested. I later thought to ask how pages related to the loan application are transferred between the broker, loan originator, and title. I called title and was told that the only pages kept on file are per the lenders instructions and that they do not keep copies of loan applications on file. This was unfortunate to hear since that was not my question and title had already previously sent me copies of those pages.

The example may not be directly related to servicers but it was meant to demonstrate how a simple inquiring question could raise new questions as to whether the oral experience was a miscommunication or a deceptive practice. Unfortunately, I do not recommend this.” (Consumer with personal or family experience with foreclosure)

Commenters with bad experiences emphasized that, at least for companies who service but do not own the loan, there are no incentives to provide correct and detailed information to the borrower. One explained: “The servicer has a contract and a fiduciary duty to the investor. The borrower is an account the servicer manages on the behalf of the investor. So ‘customer service’ really is a misnomer, they do not view us as customers. They view us as accounts. … [T]hey really do not care about anything except the revenue the account (you) provide… [T]he system is designed to bring more revenue to the servicer if the borrower is late or in default… So getting the servicer to provide information about the investor is like pulling teeth. The servicers guard this information because they do not want the borrower to tell the investor what is going on.”

From this perspective, allowing servicers to answer information requests over the phone is likely to increase miscommunication or encourage deceptive practices. Several commenters warned that consumers would be harmed by having nothing in writing to substantiate what they were told. As one wrote: “To rely on oral communication would be disastrous for homeowners. If I had not had everything in writing, I would not have the ability to take them to court.” Another (who self-identified as being involved in “foreclosure defense strategies”) agreed: “Oral testimony means zip. Zilch, nothing in the context of servicer abuse. Less than zero.”

In sum, these commenters viewed information requests in the context of borrowers’ attempting to uncover servicer ineptness or misbehavior, and so saw encouraging oral communication as ultimately weakening consumers’ position. Coming from their experiences, they tend to view CFPB’s proposals as not really empowering consumers, and as overly concerned with costs and burdens to servicers.

Consumers were not the only ones concerned about disputability of oral communications. A commenter who works for a federal credit union whose customers are mostly from the local community, said: “I am against having oral and written requests being treated equally. Written requests have, by their nature, a more formal stature and create a paper trail. An oral request will create a ‘he said, she said’ conflict.”

Some specific suggestions emerged, either to shore up oral communication practices, or as better alternatives:

  1. Written confirmation. Two commenters (one a consumer who got or refinanced a mortgage in the past 10 years; one who works for a non-profit credit counseling organization) urged CFPB to require servicers to confirm oral responses in writing, or at least to explicitly give borrowers the option of receiving such a confirmation. Also, the written follow-up when the servicer can’t answer the question immediately should restate the borrower’s request, not simply confirm that a request was made.
  2. Online chat or posting forum. One commenter (self-identified as having worked for a servicer whose customers come from all over the country and/or from other countries) pointed out that “[m]any servicers, such as Bank of America, already have customer service available via chat through their website as well. Chat could be an option for customers who are weary of speaking to a representative over the phone and would like a record of the conversation.” Another (self-identified working in the mortgage industry as a forensic auditor for a company with customers from all over the country and/or other countries) suggested that the servicer’s website contain a “special link the borrower can [use] to request additional information or personal contact from the institution. The institution can use this individual posting board to communicate with the borrower, log comments and actions regarding borrower’s inquiry. This posting board or communication log should be fully accessible by the borrower with complete transparency.”
  3. Online access. The solution most strongly urged by commenters was that consumers be given online access to relevant loan documents and account information. Considerable frustration was expressed that technology isn’t being used to solve the problem of quick and accurate access to borrowers “own” information when servicers kept these records in electronic form anyway.

There was a dispute about how readily servicers could provide such access given current business practices. The commenter who self-identified as a forensic auditor insisted that providing borrowers’ access to account information that the servicer already maintained would be “relatively cost free for the institution.” The commenter who suggested online chat identified technical obstacles to giving consumers direct access to the servicers’ client portal, but pointed out that servicers could “build the code & databases to allow borrowers to access this information via their consumer websites.”

But, the commenter who works for a federal credit union serving the local community warned about differences in servicer technology: “As someone who has been in the industry for well over a quarter I can give some insight here. For a small to midsize lender the mortgages will often be stored on a system that is not connected in real time to your core processing system. This would prevent someone from being able to view their mortgage on their home banking page. It’s not meant to be secretive but it is just a fact that different computer systems often do not communicate with each other.”

§3. Proposed turnaround time for responding

The technology issue also pervaded discussion of proposed time limits for responding to information requests: commenters insisted that the existence of electronic records should make possible much faster response times than proposed.

The commenter who proposed online chat and who self-identifies as having extensive experience with servicer technical systems, wrote: “What many people don’t realize is that all customer service representatives (even those for 3rd party vendors such as Assurant & QBE First) have at least read-only access to all borrower information. In the case of a system like FIS/LPS, if a customer calls in asking for a complete history of their loan, it would take a [] customer service rep a maximum of 1 minute (assuming the loan is very old and the rep is very new) for a representative to screenshot the SER_ screen subsets (Services Performed), including SERN (C/S Notes), the HAZ_ screen subsets (Hazard Insurance), ORI_ (Loan Origination), or FOR_(Foreclosure), etc. For example, if you call in asking for Foreclosure information, they can fax/email you a screenshot of the FOR1 and FOR3 screens along with a quick breakdown of what information to look for.”

This commenter believes the proposed time periods ignore the state of technology in the industry, and points to the ability of banks and credit card companies rapidly to process debits and credits and provide customers with up-to-date account status and transaction information. “Why, then, when it comes to mortgages does it suddenly take a week, a month, or longer to provide [comparable] information?” Another commenter agreed: “As a previous servicer of accounts, the timeframes in which the servicer has to respond are very generous, almost too generous; really this information is not that hard to provide especially if it is given verbally; written notices to the consumer would take longer.”

Some commenters recounted experiences that led them to conclude that servicers would take advantage of all opportunities to delay responding. These are included in the next section.

§4. The exception for “overbroad or unduly burdensome” requests

The proposal that servicers could refuse to respond to requests as overbroad or unduly burdensome drew a lot of critical comment from commenters whose experiences with information requests led them to believe that servicers would abuse regulatory exceptions to deny legitimate requests:

“I asked who did the drive-by inspections of my home, that my account was being billed for, after my home sold. The bank informed me this information was proprietary. [Eventually the commenter received a check for the contested amount but with no explanation.] When I asked JPMC why they mailed me a check dated … for the amount of…. and the check cover page even had a bar code and a check a number, Chase responded with: ‘Chase does not have a record of the letter you are referring to in regards to refund of fees’ ”(consumer with personal or family experience with foreclosure)

“The servicer already uses the ‘overly broad’ argument. While some of my QWR questions were answered more than once, other very relevant questions [were] not. Why is the request for the name of the trust overly broad? Why is it overly broad to ask for a copy of the loan with endorsements? Why is it overly broad to ask for the itemization of nearly $ 5000 in reinstatement fees that accrued in 11 days? My servicer refuses to answer these questions, saying they are overly broad. I think these questions were very precise. It took my servicer 62 business days to deny answering these questions.” (consumer with personal or family experience having a hard time making mortgage payment, in a household making less than $100,000/year.)

“Prior to my foreclosure, a third party (under RESPA) was hired to send out a QWR; it consisted of six pages sent certified on 4-19-2009 requesting documents to which I never would have known I had any rights to. The servicer replied on 08-10-2009… enclosing the Adjustable Rate Note and Mortgage but the remaining request were internal business records and did not need to be furnished under RESPA 12 USC section 2506 (e)(1)(A). … The servicer in the same response letter stated that they had nothing to do with the loan’s origination and that they were not affiliated with the original lender. The servicer included a contact address and phone number to where the loan originator could be reached. When [I tried] to contact the original lender, the phone was disconnected and a letter was returned labeled rejected.

“What I found out later at the Security Exchange Commission website was the bankruptcy purchase agreement between the loan servicer and my bankrupt loan originator. It described my servicer purchased the loan originators servicing rights, business assets, and the actual building to the contact address they provided to me in letter. … Notice the four months it took for the servicer to respond. I did not receive an account history until after foreclosure, and after filing a complaint with Department of Corporations. I don’t see how a servicer who purchases servicing rights, the building, and assets can inform a consumer to contact a defunct originator in which they know is no longer present. The joke was on me and the servicer had to be aware of it. …

“My last letter from the servicer wrote back. ‘Pursuant to 12 USC 2605 sec(e), the information that may be obtained on a loan under a QWR is specifically limited to information relating to the servicing of such loan… includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.’ I challenged the ‘other information sought by the borrower’ trying to gain access to original documents in relation to my loan. My servicer says they do not intend to waive their rights to other various documents sought by the borrower. So, access to original loan approval documents are impossible to access since the loan originator is no longer in business.” (consumer with personal or family experience with foreclosure)

Again, the fundamental debate is about initial assumptions. As one commenter explained, “The [CFPB’s] assumption is that the servicer is honest so the rules are proposed this way.” But for commenters who have had bad experiences trying to get information, the initial assumption is (in the words of the same commenter) that “servicers can and will use any weapon that the CPFB hands them.” Commenters were concerned that allowing for generally-worded exceptions interpreted by the servicer will undermine consumers’ right to information. One commenter, self-identified as a “credit attorney,” concluded: “Terms like ‘unreasonable volume of documents’ or ‘unduly burdensome’ or ‘unreasonable costs’ without specific definitions will foster a virtual loop hole for servicers [t]o avoid responding to consumer requests for information by simply making a subjective decision that the consumer’s request is ‘unreasonable’ ‘overburdensome’ etc. Once again it leaves the consumer without any real teeth to get results.”

Another commenter worried that “the proposed clause for information it can’t get from its records in the ‘ordinary course of business’ with ‘reasonable efforts’ is downright inviting fraud. They need the original promissory note with endorsements or allonge to assign it when the loan is transferred. When they obtain it, it should not be very hard to make a copy, right? Since the ordinary course of their business has become robo-signing, it makes it even easier to deny the request of a copy of the endorsed note.” S/he also warned that the “‘not directly related to the account’ … exclusion would give them [the] right to hide fees from their affiliates. That could make the game of inflated maintenance fees in foreclosure, force placed insurance, unearned kickback fees, attorney’s fees a whole new chance. If a servicer charges these fees, they should know what they are for and have no problem of disclosing.”

The technology issue was important here as well. Commenters argued that since servicers keep records electronically, retrieving the borrowers’ account information and loan documents should not be burdensome. “Most information that consumers ask for or need are just a few keystrokes away for the servicer, but they make it difficult if not impossible for consumers to access that information.” Several commenters complained that their requests for information yielded very general responses – either totals without itemization, or general assurances that charges and payments processing were correct. Commenters had to make further requests for details, and even these were sometimes ignored or refused on grounds of burdensomeness, etc. even though, they believed, the information must be available in the servicer’s system.

The commenter who self-identified as working on “foreclosure defense strategies” pointed out: “I believe the intent of the consumer is to retrieve all internal comments (servicer, bank, GSE, Trust Documents and any other miscellaneous information as any other clear and transparent Discovery would uncover; electronic or written). All of this information belongs to the consumer.” Another commenter asked “Why are your leaving it up to the servicer to determine if the information being requested is ‘unreasonable’ and urged that CFPB create a list of kinds of information and documents to which borrowers have a right: “It is time to make a list and determine what is ‘reasonable’ information and what is not, with specific questions, or this is useless.” (This same commenter also advocated for more details on the Periodic Statement, which s/he believes could make many information requests unnecessary.)

§5. When does a request become untimely?

Three commenters expressed particular concern about relieving servicers from responding to information requests more than one year after servicing rights had been transferred or the loan paid off.

The same commenter who proposed using chat rooms was concerned about how this limit would harm borrowers when servicing rights had been sold: “ If the CFPB gives the servicers a pass on not giving information more than a year after a servicing transfer, it is imperative that the rules for a full information servicing transfer are solid and enforced. … Loss of information between 2 banks [through] no fault [of] the borrower should never be allowed, and it happens all too often in the current environment.”

The commenter who is a credit attorney agreed that “the limitation of 1 year after loan was transferred or paid off is too short of a period of time.” S/he explained why and suggested an alternative: “Currently, many consumers are not made aware of the error until they seek to buy a new home oftentimes many years later. The credit reporting of the mortgage loan is often done so with errors such as a reported ‘foreclosure’ or ‘paid for less than full balance’ or ’settled’ when that may not be the case. It may be several years before the consumer is made aware of the error. Many regulated industries require entities to maintain records for 7 years. Why not allow the consumer 7 years to request information? This would be consistent with the time period for credit reporting of most inaccurate credit items.”

A consumer commenter (with personal or family experience with foreclosure) agreed, saying that, given history in this area, requiring servicer responsiveness for more than 1 year is just “common sense.”

§6. Question for CFPB about intersection with Fair Credit Practices Act

One commenter raised questions about whether a servicer could use its status as a “debt collector” to resist information requests: “After the borrower from frustration gives up and enters into default, the servicer just calls themselves a debt collector. Has the CFPB considered these rules in connection to the Fair Debt Collection Practices Act since the servicer is now calling itself a debt collector? … The Fair Debt Collection Practices Act does seem to provide added protection for borrowers. But I’m concerned when the servicer becomes a debt collector. At the time I wasn’t in default my servicer already classed itself as a debt collector. As shown in this video.http://www.youtube.com/watch?v=4UIbjkkv7iE What is the need for a servicer to class itself as a debt collector? I see added conflicts just by allowing the servicer to create another entity when the foreclosure sale date hasn’t even occurred? By becoming a debt collector doesn’t this allow the servicer to decide which and at what time the laws are applicable to them?”

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