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CFPB Releases Servicing Examination Procedures

In preparation to begin policing the nation's largest lenders, the ""Consumer Financial Protection Bureau"":http://www.consumerfinance.gov/ (CFPB) Thursday released its examination procedures for mortgage servicers.


The bureau will begin its review of more than 100 ""large"" banks, thrifts, and credit unions with reviews of their mortgage servicing practices.

""Mortgage servicing has a huge impact on consumers and is a priority for the CFPB,"" said Raj Date, special advisor to the Secretary of the Treasury, according to a Thursday press release.

""The mortgage servicing market has been bogged down by widespread reports of pervasive and profound consumer protection problems,"" Date continued, adding, ""We are going to take a close and measured look at whether servicers are following the law.""

CFPB examiners will be charged with gathering information regarding the banks' policies and procedures and assessing whether they are abiding by the law.

""When necessary, examiners will coordinate and work closely with CFPB's enforcement staff to take appropriate enforcement actions to address harm to consumers,"" the CFPB stated in its release.

The bureau's agents will examine samples of customer complaints and interview some consumers to ""determine


whether their complaints were resolved adequately, and whether they were resolved in a timely manner,"" states the ""CFPB Supervision and Examination Manual."":http://www.consumerfinance.gov/guidance/supervision/manual/

Examiners will also review servicing records for customers in imminent risk of default, in default, and in foreclosure.

Where an examiner sees possible violations, he or she will reach out to consumers to determine whether the servicer acted appropriately.

In the area of loss mitigation, examiners will review each bank's policies and identify where ""broad employee discretion"" exists.

Examiners will also evaluate whether the information offered to consumers regarding loss mitigation options is ""clear, prominent, and readily available,"" including any fees or negative consequences associated with the loss mitigation action.

When a customer's loss mitigation application is denied, the examiners will look for an adequate and timely explanation to the borrower.

The CFPB will also review servicers' actions regarding bankruptcy. The agency will evaluate whether the bank properly applies payments from bankruptcy trustees to clients' accounts and whether the servicer notifies the borrower, bankruptcy trustee, or court of any fees accrued by the borrower.

In cases of foreclosure, the examiners will look for instances where the borrower was not seriously delinquent, was in the process of a trial modification, or had a modification or forbearance request pending.

""The CFPB is making the general exam manual and servicing procedures public so that financial services providers know what to expect during their examinations, and so that the public knows how we are fulfilling our responsibilities,"" the CFPB stated the day of the release.

""We want to build a constructive relationship with the companies we supervise, and we understand the importance of establishing expectations up-front,"" the agency stated.

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.

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