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An Era of Forbearance Demands a Culture of Compliance

Last year, when the Consumer Financial Protection Bureau (CFPB) announced temporary flexibilities for mortgage servicers to deal with unprecedented volumes due to the impacts of the COVID-19 pandemic, many servicers took advantage of those leniencies. However, a year later, with a new presidential administration in place, the CFPB is putting those same mortgage servicers in their crosshairs.

First, let’s go back to the spring of 2020. The Bureau released seven separate statements allowing leniency in a number of areas, including quarterly reporting, credit reporting, billing error resolution timeframes, examinations, supervisory activities, and more. For servicers who didn’t have disaster protocols in place, relaxed standards were like a gift from above.

A recent bulletin from the CFPB has addressed those servicers directly. “Unprepared is unacceptable,” it warned. “There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months. There is no time to waste, and no excuse for inaction.”

While the return of strict compliance guidelines will impact some mortgage servicers, TMS Subservicing is set to weather the storm, and for one simple reason: TMS compliance protocols were never relaxed or compromised. Nor will they ever be.

3 Lines of Defense
Since its inception, TMS Subservicing has developed and adhered to rigorous protocols. After all, the company was founded because there wasn’t a subservicing partner who was as stringent as the organization was internally. TMS standards have never been lowered due to the pandemic or anything else.

In fact, TMS started by instituting what’s called 3 Lines of Defense or 3LOD. The three departments work collaboratively to ensure TMS operates with structural integrity. Early on, it became clear that if TMS Subservicing was to succeed, going above and beyond the subservicing status quo would have to be standard practice.

Line #1: Business Unit Risk Management
The first line of defense means establishing Quality Assurance in each line of business. TMS’ culture of compliance is integrated into every inch of TMS’ operation. They perform regular testing, monitoring, and reporting to identify and eradicate early potential concerns immediately.

Line #2: Compliance Testing and Monitoring
Considering the CFPB’s new stance toward mortgage servicers, TMS’ second line of defense is particularly critical. This is crucial compliance work, starting with change management. Regulatory guidelines change often. This team monitors policy changes, communicates necessary protocol adjustments, and develops plans to ensure compliance. Once changes are implemented, the compliance team goes back and tests to ensure the changes are working as intended.

Line #3: Internal Audit
The Internal Audit department employs a four-step process to identify irregularities. It challenges the effectiveness of all company processes and controls in the same way an external body would. Through proactive scheduling, a letter of engagement, an on-site review, and follow-up meetings, the internal auditors independently assess the state of the business, identify areas of improvement, and outline potential remediation activities.

At TMS, a culture of compliance and care is woven into and through all departments. Unlike some organizations who bring in compliance in a limited role, the TMS compliance team is engaged in every step. In this way, the CFPB’s renewed focus on servicers and their practices is welcome news. There is nothing to hide here.

Compliance Going Forward
The CFPB has promised to evaluate mortgage servicers by several major criteria:

  • Being proactive
  • Working with customers
  • Addressing language concerns
  • Evaluating income fairly
  • Handling inquiries promptly
  • Preventing avoidable foreclosures

TMS Subservicing checks all of these boxes with policies, procedures, and processes that are proven. As the waves of forbearance crashed ashore during a difficult year in 2020, TMS worked with customers to find the best loss mitigation steps based on their unique situations. Additionally, by stepping up instead of back, TMS hold times in our Customer Care Center were shorter than competitors, and forbearances and delinquencies were kept below the industry average.

If they stay true to their word, the CFPB will be paying many mortgage servicers a visit very soon. TMS is prepared for this and always has been. By adhering to a Culture of Care, TMS holds true to internal compliance standards, whether there’s a pandemic going on or not. If your subservicer is subpar with their compliance, the time has never been better to switch to the industry standard.


About Author: TMS

Founded in 1997, TMS is a fast-growing fintech company that provides products, technology, speed of service, and a unique customer experience to borrowers, clients, and team members in their pursuit of happiness. TMS is a national correspondent investor, servicer, and subservicer.

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