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CFPB Warns Servicers to Follow Loan Transfer Rules

loss-mitigation [1]The Consumer Financial Protection Bureau (CFPB [2]) issued a bulletin [3] on August 19 for mortgage servicers, outlining how they should handle the loan transfer process.

The bulletin includes a reminder to mortgage servicers to pay close attention to the new common-sense mortgaging rules implemented by the CFPB in January 2014, aimed at protecting consumers from being harmed during loan transfers.

"At every step of the process to transfer the servicing of mortgage loans, the two companies involved must put in appropriate efforts to ensure no harm to consumers. This means ahead of the transfer, during the transfer, and after the transfer," CFPB Director Richard Cordray said. "We will not tolerate consumers getting the runaround when mortgage servicers transfer loans."

The CFPB has been pushing for mortgage servicers to more strictly adhere to the new servicing rules throughout 2013 and 2014. Mortgage servicers handle collection of payments from borrowers on behalf of lenders was well as services such as escrows, loan modifications, and foreclosures. The borrower generally has no input as to the selection of the servicer. Loan transfers are common among mortgage servicers.

The common-sense mortgage servicing rules require more from the servicers in order to ensure the consumer is protected. For example, accurate record keeping on the part of the servicer is required, as is the correction of errors when the consumer requests it. Servicers are obligated to keep a set of policies and procedures in place for the accurate and prompt transferring of information when a loan is transferred.

The bureau stated in the bulletin that its examiners will be scrutinizing those loan transfers that include loss mitigation applications pending and approved modification plans. Examples of compliance with the law may include the timely transferring of documents or the flagging of loans. Any servicer found to be in violation of the law will be subject to corrective measures at the hand of the CFPB.