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Outdated Technology Bogging Down Some Servicers

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A regulatory report indicates that mortgage servicers are continuing to utilize failed technology that has harmed borrowers and violates servicing rules.

The Consumer Financial Protection Bureau issued final servicing rules in 2013 that outlined how mortgage servicers need to handle distressed borrowers.

Since the final mortgage servicing rules took effect in back in January 2014, the bureau has conducted examinations on numerous home loan servicers.

In a supervision report announced Wednesday, the CFPB said that its
examiners have found violations because of deficient technology and process breakdowns.

“Specifically, examiners have observed problems with loss mitigation and servicing transfers,” the regulator said.

The rules are intended to address widespread problems that have been around since before the financial crisis and were exasperated by millions of borrowers who became delinquent as a result of the crisis.

Among other things, the rules require that servicers maintain accurate records, give distressed borrowers direct
and ongoing access to servicing personnel, and promptly credit payments to the loans when received.

They also require that errors be corrected on request.

But despite that some investments that have been made in compliance, the investments have been inadequate.

Outdated and deficient technology at multiple servicers is putting borrowers at risk, according to the CFPB.

This has led to problems with information about loan modifications and with loan servicing transfers.

In addition, the bureau says
several servicers lack proper training, testing and auditing of their computer systems and software platforms and those of their service providers.

“Mortgage servicers can’t hide behind their bad computer systems or outdated technology,” CFPB Director Richard Cordray said in the statement. “There are no excuses for not following federal rules.


Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally.”

But the bureau did acknowledge that
some servicers have made significant improvements over the last several years. This was accomplished, in part, by enhancing and monitoring service platforms, staff training, coding accuracy, auditing and allowing for greater flexibility in operations. 

An updated mortgage servicing exam manual is being released by the CFPB to
help the industry to comply with the rules. It’s the third update.

The updates target complaint handling and requests by delinquent borrowers as well as discrimination issues.

The updated manual is online at www.consumerfinance.gov.

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