Speaking as part of the "CFPB's National Servicing Standards – Update Session" section of the Compliance Lab at the Five Star Conference on Monday, VP of compliance solutions for ISGN Deana Elkins gave those in attendance some tips on compliance using the rodeo analogy.
Elkins compared CFPB to a "bucking bronco" in the rodeo because of the watchdog bureau's reputation of ruling the mortgage servicing industry with an iron fist. She encouraged servicers to "get prepared for the ride" in order to avoid the penalties of non-compliance.
Servicers face many challenges in the "rodeo" arena, Elkins said, and they face even more challenges when international servicing comes into play, such as the challenges of invoice management and loan level recons when it comes to outsourcing. But servicers should also have compliance controls in place in order to avoid pitfalls such as charging excessive fees, misapplying payments, dual tracking, failure to disburse escrow payments appropriately, failure to keep accurate and thorough records, and failure to effectively communicate with borrowers.
"The CFPB expects every entity it supervises to have an effective governance structure comprised of diligent Board administration and written policies and procedures compliant with regulatory requirements," Elkins said. "With that compliance framework there are areas necessary to be implemented that will assist servicers in avoiding CFPB violations."
Those violations have resulted in millions of dollars in fines and penalties imposed on financial institutions that did not have one or more of the aforementioned compliance controls in place. Referring back to the rodeo analogy, Elkins reminded the audience not to ignore what is required to "ride" and the "judge" (CFPB in the case of servicing) will not penalize their score.
Elkins reminded the audience that CFPB has the authority to charge a $5,000 per day civil penalty even if the servicer unknowingly committed a rules violation, and the bureau can fine an entity up to $1 million for knowingly broke the law – which could cripple or even shut down a servicer. Elkins also said that the way the Dodd-Frank Reform Act was written, CFPB has no statute of limitations, therefore increasing its power.
Servicers now have to be more aware than ever of the rules because they are always changing, and Elkins suggested four things servicers can to do keep up with the changes and therefore avoid "injury" in the rodeo by getting thrown off the bronco, the equivalent of being penalized by CFPB. The four things are: reviewing the new rule to understand its impact on affected areas; develop, update, and modify as far as policies, procedures, staff training, and documentation; train and disseminate information; and monitor and take corrective action, which includes self-assessment and ongoing reviews to ensure compliance.