At a U.S. Senate Committee on Banking, Housing, and Urban Affairs hearing Tuesday, industry leaders voiced opinions on the creation of national mortgage servicing standards. While there was support for national standards on the grounds that it would protect homeowners and improve customer experience, witnesses expressed a variety of concerns.
[IMAGE]Concerns included the possibility of further complicating already complex, overlapping standards from a variety of authorities; creating undue hardships for well-performing community banks; and negatively impacting responsible homeowners who are able to keep up with their mortgages.
""We all want to improve the customer experience, and the establishment of uniform, clear standards would be a strong step in that direction,"" stated Faith Schwartz, executive director of the HOPE NOW Alliance.
However, Schwartz warned legislators to evaluate the various standards already in place before moving forward with creating new standards.
""In evaluating the need for uniform national servicing standards, it is important to understand the wide variety of rules and initiatives already in progress that servicers are attempting to understand and implement as they develop and utilize a single point of contact and address dual track processing issues,"" Schwartz said.
Servicers must already accommodate a range of rules from several authorities: the OCC, Fannie Mae, Freddie Mac, HAMP, state servicing laws, private investor requirements, the CFPB and others.
""To ensure that all these initiatives on servicing standards achieve their intended goal, we would suggest that the Administration convene a summit with all necessary partners from the industry, the government, nonprofit agencies and other concerned entities to review the new standards underway, evaluate them and determine what should be included in a uniform national standard,"" Schwartz said.
Peter Swire, a law professor at Ohio State University, also testified in support of creating national mortgage standards as a way of better serving homeowners.
He argues that homeowners are often at the mercy of their servicer - a servicer they did not choose and whose loyalty is to the investor, not the homeowner.
""Homeowners not only lack any market choice, but they currently lack legal remedies if the servicer performs badly. That is the reason that national standards for mortgage servicing are so important,"" Swire said.
Speaking on behalf of the Independent Community Bankers of America, Jack Hopkins, CEO of CorTrust Bank, addressed concerns that national standards would negatively impact well-performing community banks.
Hopkins asserted that many community banks continue to successfully manage their portfolios without the problems that larger servicers have faced.
CorTrust and many other community banks' delinquency rates are only one-third the national average, Hopkins stated.
Blanket standards such as the implementation of a call center would create prohibitive, unnecessary costs for smaller banks, according to Hopkins.
""The most significant risk in applying standards that are too rigid and prescriptive to all banks, regardless of size, is that additional expense would surely cause many community banks to exit the mortgage-servicing business and accelerate consolidation,"" Hopkins said.
""Congress and the regulators must prevent community banks from being harmed by any newly proposed national standards,"" he said. ""I urge you not to tamper with our success.""
Like Hopkins, Rob Couch, an attorney with Bradley Arant Boult Cummings who previously worked with HUD and Ginnie Mae, hopes lawmakers will consider the far-reaching impacts of their decisions.
""We, of course, must also balance everything against the long-term impact that the unintended consequences of our actions will have on homeowners and the housing market,"" Couch said.
""Most of the servicing standard proposals, however, do not consider the majority of hardworking Americans who do pay their mortgages every month. National servicing standards that do not address the marketplace or the people who are not in default subject those people to the ‘foreclosure overhang,'"" Couch said.
Couch also stated his hope that lawmakers will be mindful of state servicing laws when creating any new national standards.