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US Bank: The Legal Challenges of Default Servicing

Beth Northrop-DayBeth M. Northrop-Day is VP and Assistant General Counsel with US Bank, having joined the bank in August 2014. She is currently lead attorney for default management servicing control and default (servicing) operations, which includes but is not limited to foreclosure, REO/eviction, third-party vendor management and attorney oversight, audit and issues management, and mortgage default operations (including SPOC & MAP, default resolution, and business line controls management). Northrop-Day also has experience in the management of highly contested litigation related to mortgage foreclosures and has worked closely with various entities regarding compliance of state and federal-based rules and regulations.

During the 2018 Five Star Conference and Expo, Beth Northrop-Day took some time out to sit down with DS News and discuss where default servicing is headed, the legal cases that could seriously impact the industry, and how legal firms can best streamline their interactions with servicers.

What does a typical day look like in your role, if there is such a thing?

I don't think there is a typical day for an in-house attorney. I support many different business lines including mortgage default, attorney vendor oversight, and early-stage default. It's a matter of what's coming into the inbox, what's on the phone, or just putting out fires and trying to be proactive. I don't think I've had one "typical, standard day" since I started in this industry.

There are days when I wish it would calm down a bit so I could concentrate on one thing at a time. This industry is always moving. You don't know what's coming next, so the challenge is in trying to stay ahead of the game and do the right thing. At US Bank, we pride ourselves on trying to power potential and staying a step ahead.

Do you see the trends and challenges that have defined the mortgage industry in 2018 continuing into 2019, or do you think there are any significant changes on the horizon?

Mortgage is cyclical. We're in a great phase right now where companies are still originating, homebuying is occurring, people are successfully paying their mortgages, all fantastic things. But, if I were to hazard a guess, by mid to late 2019, or perhaps early 2020, we'll start to see some changes. Some mortgages will be hitting their five- to seven-year marks—what's that going to look like? I don’t know. Mortgage changes along with the economy, so I anticipate seeing some things changing. As a mortgage industry though, we’ve made so many incredible changes—we are proactive and are working hand-in-hand with borrowers, investors, and regulators.

Are there any cases that have been decided recently or that are in the pipeline right now that you foresee having a major impact on the industry in the months to come?

There’s a case out of Colorado—Obduskey v. Wells Fargo. It's a Fair Debt Collection Practices Act (FDCPA) action dealing with the issue of whether the FDCPA, which protects borrowers, applies in foreclosure proceedings that take place outside the court system. This case is now before the U.S. Supreme Court. From a lender and servicer perspective, if a non-judicial foreclosure is suddenly reclassified as debt collection, as opposed to lien enforcement, that could have an impact on the industry.

What are some of the ways financial services firms can best partner with servicers in order to streamline that relationship and make for a more productive business relationship?

I work with our law firms every single day, whether it's from a foreclosure perspective, REO, bankruptcy (as to law firm oversight), and loss mitigation. We rely heavily on the law firms to keep us updated on all laws that are coming down, legislative changes, and trends that they're seeing. They're the ones in court; they're the ones talking to the judges. I rely on them heavily to communicate with me, because I need their guidance and I need their support to ensure that I fully protect the bank, that I'm protecting our borrowers, and that we're always doing the right thing.

What is one thing you wish more people understood about what you do?

What people need to understand is that we are not about taking people’s houses. We want to partner with borrowers, we want to stay a step ahead, and we want to do the right thing. Whether you're a bank servicer or a mortgage servicer, we're not in business to become property owners. We want everyone to be successful. I want you to have a mortgage. I want you to love your home and stay in your home and make your payments, and whatever I can do to help you do that, we're going to step back and we're going to look at those programs.

About Author: David Wharton

David Wharton, Online Editor at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has over 15 years of experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. Wharton and his family currently reside in Arlington, Texas. He can be reached at David.Wharton@DSNews.com.
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