If you are in the mortgage servicing industry, you know how complex and challenging it is to comply with the myriad of regulations that govern your business. You have to deal with different rules for different jurisdictions, loan types, and process steps. In this blog post, we will give you an overview of the regulatory landscape for mortgage servicing, and how it affects your operations and compliance costs.
According to one recent analysis, there are 10,550 regulatory requirements for mortgage servicing in the US. These requirements cover various aspects of servicing, such as disclosures, fees, practices and restrictions, and records retention. Each requirement is a specific obligation that applies to a certain jurisdiction, such as a state or a federal agency. For example, one requirement is that servicers in New York must assign a single point of contact (SPOC) to borrowers who are in the loss mitigation process within 30 days.
*Source: ComplianceEase
Not all requirements apply to all loans. Some requirements only apply to loans that are delinquent, or in the process of loss mitigation. Loss mitigation is the term used to describe the servicing of loans that are at risk of default or foreclosure. Servicers have to follow specific procedures and offer certain options to help borrowers avoid losing their homes. There are 2,807 regulatory requirements for loss mitigation servicing, which is about 27% of the total requirements.
The majority of the requirements, 7,743, apply to servicing loans that are not delinquent, or “current”. Servicers have to perform various tasks and functions for current loans, such as collecting payments, escrowing taxes and insurance, sending statements and notices, and reporting to investors and regulators.
The 10,550 regulatory requirements for mortgage servicing can be grouped into 4 categories: Disclosures, Fees, Practices and Restrictions, and Records Retention. Disclosures are information that servicers have to provide to borrowers, investors, regulators, or other parties. Fees are charges that servicers can impose on borrowers for certain services or actions. Practices and restrictions are rules that govern how servicers perform their duties and interact with borrowers. Records retention is the obligation to keep and maintain certain documents and data for a specified period of time.
The largest category is practices and restrictions, which accounts for 6,782 requirements, or about 64% of the total. These requirements cover a wide range of topics, such as payment processing, escrow administration, error resolution, borrower communication, loss mitigation procedures, foreclosure prevention, and servicing transfers.
The second largest category is disclosures, which comprises 1,861 requirements, or about 18% of the total. These requirements include sending periodic statements, annual escrow statements, payoff statements, notices of rate changes, notices of servicing transfers, notices of error resolution, and other disclosures required by federal or state laws.
The third largest category is fees, which consists of 1,651 requirements, or about 16% of the total. These requirements regulate what fees servicers can charge borrowers for various services or actions, such as late fees, payoff fees,inspection fees,modification fees,and others. Some fees are prohibited by law,while others are subject to limitations or conditions.
The smallest category is records retention,which makes up only 256 requirements,or about 2% of the total. These requirements specify how long servicers have to keep and maintain certain documents and data,such as loan files,payment histories,escrow accounts,servicing agreements,and others.The retention periods vary depending on the type of record and the jurisdiction.
As you can see, the regulatory landscape for mortgage servicing is complex and diverse. Servicers have to comply with thousands of requirements that vary by jurisdiction, loan type,and loan status. Compliance is not only a legal obligation, but also a business necessity. Failure to comply can result in fines, penalties, lawsuits, and reputational damage. Servicers need to have effective systems, processes, and controls in place to ensure compliance and mitigate risks.