Reform and Consumer Laws in the Note Business

NNG on the Necessary Steps to Comply

With CFPB Amended Regulations

It’s said that rules are essential to keep organization and enhance clarity in communication throughout society. Some people need guidelines to better comprehend things and/or simply for protection. The CFPB is one such agency geared for consumer protection. It was established by the Congress to protect people by carrying out federal consumer financial laws, among other things.

The Dodd­Frank Wall Street Reform and Consumer Protection Act passed in July of 2010, was reformed at the beginning of 2014. Although it includes many new regulations dealing with mortgage loans, the most important to review for our purposes are Ability­to­Repay and Qualified Mortgage Standards and Mortgage Servicing Rules (RESPA) acts. The CFPB’s amended regulation Z prohibits a creditor from making a higher priced mortgage loan without regard to the consumer’s ability to repay the loan. It is required by the Dodd­Frank Reform to: make reasonable/good determination of consumer’s financial ability to pay, establish certain protections from liability, and evidence of compliance with the rule of three years after a covered loan is “consummated”. Regarding mortgage loan servicing, CFPB’s Dodd­Frank Act addresses servicers’ obligations to correct errors by mortgage loan officers, provide information requested by borrowers, etc. In addition, this rule addresses obligations to establish policies and procedures, within reason, to reach certain “delineated objectives”. They must also provide information essential and relevant to mortgage loss mitigation. For further information on the multitude of CFPB regulations visit: www.consumerfinance.gov

How can you ensure you are in compliance? It seems CFPB is currently more focused on the bigger players in the industry. As junior note buyers, our job is to be competent at what we do without coming off on the wrong foot with the CFPB. If buying non­performing loans and outsourcing the service work, one should make sure that they are using a servicer that is CFPB compliant, with policies and procedures in place to deal with loss mitigation requests from the borrower. For those who buy their own debt and do their own loss mitigation efforts one should: 1. Be responsive to the borrower in demand, 2. Evaluate those requests in a timely fashion, 3. Over­communicate, 4. Make sure every conversation with the borrower is noted in writing. Keep in mind if you are servicing your own loans, you need a servicing license. Last thing to remember is to make sure you have single point communication throughout the process, and have a good understanding of the borrower’s financial history, in addition as what solution they are seeking.