Changes Ahead for Mortgage Servicing
Diana Olick is off today. This post was written by Stephanie Dhue, CNBC Real Estate Producer.
Robo-signing, lost paperwork and wrongful evictions have put mortgage servicers under the gun.
Banking Committee Chairman Tim Johnson on Tuesday blamed servicers, in part, for stalling a housing recovery: “Homes that should move through the foreclosure process are held up because courts and servicers are concerned that paperwork has not been completed properly.”
To address the problem, lawmakers are considering a national standard for mortgage servicers.
The four largest — Bank of America, JPMorgan Chase, Wells Fargo and Ally Financial — have 60 percent of the servicing market.
The industry is urging caution. Servicers are already subject to a slew of new servicing rules from bank regulators, the FHA, Fannie Mae and Freddie Mac. And more could be on the way, as banks are in settlement talks with states attorneys’ generals.
Faith Schwartz, who heads up the industry-led Hope Now Alliance, says “it is important to understand the wide variety of rules and initiatives already in progress.”
One rule creates a single point of contact. While it may sound simple, Schwartz describes companies having to complete intensive retraining of employees, so they can answer all consumer questions, instead of passing them from department to department. That has been a huge frustration for borrowers.
Dissatisfaction with the industry has grown in the last year, according to consumer-opinion surveyor JP Power. Much of it comes from borrowers who would like to refinance but can’t because falling home prices have left them without enough equity in the property or they can’t meet today’s tougher credit requirements.
Credit unions, independent and community banking groups want an exemption from a national standard, saying they were not part of the problem. Jack Hopkins, who is CEO of CorTrust Bank in Sioux Falls, SD, says his bank competes for loans by keeping the loans in-house, but to comply with rigid and over-prescriptive new rules could force them to exit the servicing business.