During the last 18 months, residential mortgage default servicing has faced increased scrutiny. Actions by state and federal regulators have set new regulatory expectations. The sources of the new servicing standards are varied; yet, at least, six standards have clearly emerged. Prudent servicers should consider taking practical steps now to satisfy them, including the following:
- Foreclosure-process governance. Servicers should review and revise (or rewrite) written policies and procedures for all key functions, and implement mechanisms to ensure the appropriate management, reporting, and board oversight of compliance at all levels. Additionally, servicers should take a fresh look at their monitoring efforts.
- Dual-track processing. Servicers under a mandate to cease dual-tracking must discontinue the practice of proceeding with foreclosures when are borrowers are current on trial modification plans. Ending dual-tracking requires significant coordination among internal groups and third-party service providers, together with the computerized systems on which they rely. Quality control and data integrity are paramount to ensuring that policies, procedures, and intentions materialize.
- Affidavit and notarization practices. Servicers should review and revise written procedures on standards for personal knowledge, use of business records, and adherence to notarization formalities. Doing so requires up-to-date review of state law requirements. Additionally, servicers should create an auditable trail for attested facts and conduct comprehensive training (and retraining) for affiants and notaries.
- Documentation practices. Servicers must implement processes sufficient to: i) ensure the ability to locate and access all pertinent documents; ii) to create an auditable trail of all facts asserted in the affidavit; and iii) to prove the plaintiff’s legal standing to foreclose.
- Legal compliance. Servicers should ensure that they have a detailed compilation and understanding of state foreclosure laws and regulations. A system to actively monitor regulatory changes, a standing procedure for timely implementation of changes, and audit processes to both ensure compliance and identify exceptions should be developed. Reliance on foreclosure counsel, without sufficient monitoring of substantive legal work performed, is likely insufficient.
- Third-party vendor management. Servicers should review their current relationships with third-party vendors to ensure compliance with bank procedures, legal standards and emerging industry best practices. This includes: i) reviewing agreements with all vendors, especially those with outside foreclosure counsel; ii) implementing a careful due-diligence process when selecting and renewing vendors; and iii) providing ongoing oversight. Any adverse findings from these reviews should be considered in evaluating whether to retain or discontinue specific vendors.
This post adapted from the article, “Regulatory Actions Melding into National Servicing Standards” by Jonice Gray Tucker and Valerie L. Hletko, originally published in Servicing Management, February 2012.Mortgage Servicing