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3 Questions for Gate House Compliance’s Dror Oppenheimer
Nationally Recognized Credit and Underwriting Expert Speaks on CFPB’s Reg X Proposal:
“Having this draft language available gives mortgage servicers the opportunity to begin preparing now for a final rule.”
Question: We’re a little over a month away from the current deadline for public comments on the CFPB’s proposed rule for changes to Reg X. The proposal that came out earlier this month focuses on default servicing requirements and the framework for regulating how the mortgage servicing industry handles loss mitigation. Major industry groups already have responded pretty favorably to what the Bureau announced. Do mortgage servicers have anything to worry about here?
Oppenheimer: Keep in mind several trade associations have asked for an extension to the comment period. But I think that’s driven by thinking that a relatively short 60-day comment just isn’t practical in the summer season. Otherwise, you should expect to see a generally favorable response from industry. That’s because this announcement essentially boils down to the CFPB memorializing changes that it made on an interim basis in 2022 during COVID. Those changes were viewed back then as positive for both consumers and for servicers.
Question: What were those changes about?
Oppenheimer: They were largely about the streamlining and regularizing of the loss mitigation process and the rules designed to protect borrowers from preventable foreclosures. Ever since the pandemic, servicers have become accustomed to what had been instituted only temporarily. In fact, changes of this nature first appeared in 2014 when the CFPB standardized the foreclosure and loss mitigation rules for mortgage servicers following the financial crisis. Before then, there was a lack of standardization of loss mitigation rules across the mortgage industry. The industry has already been operating in this particular regulatory environment for the better part of a decade now. What the bureau is saying is, “How you’ve been dealing with Reg X over the past several years is the way of the future as well.”
Question: So, servicers have nothing to worry about?
Oppenheimer: I wouldn’t say it quite like that. On the one hand, it’s not at all surprising to see this proposal. At the same time, no one should ignore the task ahead at hand. Having this draft language available gives mortgage servicers the opportunity to begin preparing now for a final rule, which is almost certainty inevitable. I’d recommend they take a deep dive into the proposed language today to focus on any language that may be overly burdensome, and prepare their systems, policies and procedures accordingly. In other words, now is the time to make sure their operations, especially processes related to loss mitigation, line up with what the CFPB has signaled will ultimately be in place for the future.