As part of the COMPLY Summit Series, we had a virtual discussion with Richard Cordray, former Director of the CFPB, where he shared his insights on a range of timely topics including: managing a remote workforce, navigating the regulatory landscape, creating a strong compliance practice, and how to mitigate risk and avoid enforcement actions from the Bureau. With so much content applicable to compliance professionals and beyond, we're going to go in-depth on each topic in a series of blog posts in the coming weeks.
Part 2 of this series will cover his insights on the new regulations and guidance around mortgage forbearance, the challenges consumers and organizations are facing, and how to solve them.
The Struggle with Loan Modifications and Regulation X
As the current pandemic continues to affect consumers' financial stability, regulators are providing new guidance and laws to help consumers. In light of those who are struggling to keep up with their mortgage payments, the recently passed Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes provisions on forbearance for federally backed mortgage loans.
While this is beneficial for consumers who need it, it does cause some difficulties for both consumers and mortgage servicers. The issue with this, Cordray says, is that many consumers are confused about their rights, and oftentimes aren't even aware of the rights that they have. Since many are unaware of what they are entitled to, they may not be taking the necessary steps to help ease their financial burdens.
With the rapidly-changing regulatory environment, "it's difficult for compliance officers to keep up with, let alone the general public that doesn't even know about these things, except for hearing about them through word of mouth." -Richard Cordray
For mortgage servicers, they must ensure that they are staying on top of new laws, maintaining compliance, and acting quickly to help consumers. On top of this, mortgage servicers are seeing a huge increase in call volume for forbearance. Keeping on top of these requests and act in a timely manner to help affected borrowers-all while complying with Regulation X's verbal loss mitigation requirements is a real struggle for many companies.
How the Bureau Can Help Consumers and Servicers
There are ways that the Consumer Financial Protection Bureau (CFPB) can help consumers and mortgage servicers during this time-and already have. For consumers, the Bureau created a website dedicated to helping them navigate mortgage and housing assistance, including informational videos and documents.
For mortgage servicers, Cordray says, a valuable tool that the CFPB offers is their Consumer Complaint Database. "The problem with most economic data is that it is gathered after the fact, with a lag. It has to be organized, compiled, and analyzed. You're often months out of date or certainly weeks out of date," says Cordray. However, Cordray strongly recommended for servicers to utilize the complaint database. Since it is updated in real-time, it will provide a comprehensive and accurate snapshot of the struggles that consumers are facing right now. Armed with this information, servicers can easily keep an eye on what's happening and act accordingly.
Not surprisingly, the CFPB has seen a large increase in complaints related to mortgages, including:
- Struggling to make payments during the pandemic
- Facing issues when trying to make payments
- Voicing their concerns against balloon payments after a forbearance period
The Bureau is tuned into these complaints and has already taken action in response, such as working with the Federal Housing Administration and encouraging lenders not to require balloon payments.1
Managing the Increased Volume of Requests
Due to the pandemic and the increased flexibility on the different formats being accepted for forbearance applications (including verbal requests over the phone), servicers are experiencing a big influx of calls from affected consumers looking for assistance.
So, how can mortgage servicers manage this increased call volume and identify and act on verbal loss mitigation requests in a timely manner, all while ensuring compliance with the CARES Act and Regulation X?
To help answer this, Cordray reflected back on the last financial crisis in 2008. Many companies were not prepared to handle the heavy volume increase they were about to face, and as a result, many struggled to keep up. The lesson for this time, he suggests, is that loan servicers should prepare themselves with an appropriate amount of staff, and/or with an automated monitoring system.
Having an automated monitoring system that can automatically review every minute of every call to find and flag those that can be classified as oral requests, and therefore trigger the obligations that stem from receipt of an application (including sending an acknowledgment letter and exercising reasonable diligence to assist the borrower in completing the loss mitigation application) to be sent on to compliance departments for assistance are proving to be invaluable to servicers.
Having this automation not only helps manage volume request and increase speed to help consumers, but it also shows a good-faith effort to comply with Regulation X, mitigating your risk and protecting your brand.
If you're interested in learning more about how PerformLine can help automate your compliance process, during a time of crisis and beyond, speak to one of our experts today.