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I appreciate the financial difficulties small servicers may face. However there are options e.g. subservicing, which can lower cost, improve service and comply with the proposed regulations.
If customer service is the goal then the size of servicer should not be a criteria as there are small servicers that do not provide adequate service.
First, I want to thank you for your response. I’m never sure if anyone reads this stuff or cares. What the CFPB does will be very important to borrowers and service providers. I don’t agree that size is a necessary condition for excellent service. We work with financial institutions that service from 10 loans to 10,000 and the largest give as good and sometimes better service than the smallest. Most certainly the largest generally have more products to offer? I believe that most sophisticated financial institutions understand that the total potential relationship a borrower can bring is substantially greater than the value of the servicing strip. These relationships often develop and evolve over a period of time. If the financial does not meet the borrower’s service level… more »
So one of the measures I would use to determine if an institution should be exempted is, Has the institution ever sold servicing? If it has it cannot qualify for exemption regardless of its size. In my opinion this is a necessary but not sufficient condition for exemption. I know of many small institutions that sell servicing. I have never seen a seller of servicing large or small that had a quality of service provided by a purchaser of the servicing as a requirement for sale. It has almost always been determined by the amount the purchaser would pay. There are many companies that will facilitate purchases and sales. I believe they would agree with me on this point.
I have several other thoughts but this is getting almost too long to read.
I realize that my position my seem a bit extreme. What do you think about this point?
I believe that RESPA should be modified and mandate that the servicer acquiring servicing become responsible for all outstanding payments as of the day of transfer and all payments received by either the selling or purchasing servicer on or after that date. The selling servicer should be legally prohibited from contacting the borrower on a transferred loan for purposes of collecting a payment after the transfer date. This prohibition would apply to collecting on NSF checks as well. The purchasing servicer should be obligated to reimburse the selling servicing for NSFs and perform the function of collecting NSF payments. If the borrower maintains that a payment was made to the prior servicer it is the responsibility of the purchasing servicer to collect from the selling purchaser. I am in favor… more »
Purchasing servicers should not be allowed to pass the buck to the prior servicer. They should be required to make good with the borrower and settle with the selling servicer however they can. The business risk of not being able to collect from the selling servicer should be taken into account as part of the purchase and sale contract. The borrower should not be caught up in an argument between seller and buyer.
Thanks for your question.
I believe the transferring servicer should not be allowed to contact the borrower subsequent to the transfer date for any reason. If contact is necessary such as to follow up on an NSF the new servicer should be required to make the contact on behalf of the old servicer. Any requests to borrower to send another payment, for example, should come from the new servicer and funds should be sent to the new servicer. This will ensure that the borrower will not get caught up in a dispute between services.
I believe if the suggestion I made was in place you would not have had a bad experience when your loan was transferred. Take a look at it and let me know if you think it would have helped.
Welcome to Regulation Room, peekaboo.
One justification that the CFPB gives for the smaller servicer exemption is that smaller servicers are more likely to have regular interaction with customers, usually from providing other services such as debit cards and checking accounts. The CFPB believes that this gives smaller servicers a greater incentive to stay in touch with borrowers and provide greater service. What do you think about this point?
Peekaboo, thank you for sharing your perspective as someone who works for a mortgage servicing company. It sounds like you are saying that size is not the best criteria for deciding who receives an exemption, rather they should be judged on whether they own the mortgage or not. In fact, CFPB only grants the small servicer exception when the servicer “services only mortgages that it (or an affiliate) currently owns or was the original lender for AND services no more than 1,000 closed-end mortgages.” Do you think that the test should only be whether the servicer services only mortgages that it currently owns or originated? What do others think of this proposal?
Hi peekaboo, thank you for your comment. Are you saying that you support CFPB’s proposal in the section on getting info to the new servicer, which would require old servicers to forward payments received up to 60 days after the transfer to new servicers? It sounds like you’re concerned that borrowers could have both the old and new servicers demanding payment for the same month. Do CFPB’s other proposals on transferring information to new servicers solve that concern, or do you propose an additional layer of protection?
I disagree with the “send it back to the borrower” idea. This does not make sense and does not benefit the borrower. This will only incur late fees to the benefit of the servicers. The borrower should be able to send payments to the old servicer up to 60 days after the transfer date without fear that the payment will not be applied. The borrower should only be concerned with making the payment on time. The old and new servicer are already in a contractual agreement, so tranferring the payment from the old servicer to the new servicer is a simple electronic transaction. It is applied on the same day the old servicer recieves the payment from the borrower. So this talk about sending payments back to the borrower is detrimental to the borrower, this is against the entire purpose of… more »