Responding to mortgage borrowers is always good customer service but sometimes it is also required by regulation. This is especially true post-closing with the servicing department.
Getting sidetracked ...
During origination, keeping a borrower informed is a key driver of customer satisfaction. To back that up you can point to the JD Power Mortgage Origination results. You can also point to common sense. Example - I bought a pair of shoes online recently. I got an e-mail confirming payment. Another e-mail explaining that it might take 1-2 days to ship. Another when it shipped. And a final e-mail telling me that it had been delivered. That's 4 e-mails in 5 days for a pair of shoes! Yet some lenders struggle to provide regular updates to a borrower regarding a mortgage loan that may take several weeks or more to close? Seems crazy to me.
Back to today's topic ...
Aaanyway. Back to today's topic. Responding to mortgage borrowers is also important post-closing (in servicing).
Story Behind the Regulations
Look at what happened in 2008 (this from the perspective of the people who wrote the regulations) to understand the rules:
The housing industry collapsed and quiet servicing/collection departments were quickly flooded with borrowers who wanted help paying their mortgages. What are my options? What should I do? Can I tell you what's happening and see if you can help me? So a servicing staff with a 500:1 loan:employee ratio, which operated fine before, suddenly was drastically understaffed. Many departments couldn't hire enough people fast enough.
So calls didn't get answered. People had difficulty getting good advice. They weren't informed of loss mitigation options that were actually available. They spent an hour on Monday telling their story to Tracy from loan servicing only to call back on Tuesday and have to start over again with Jim-- getting nowhere.
And so then they wrote the Dodd-Frank Act. And then the CFPB wrote new servicing regulations to help borrowers in similar situations. Some of these rules put new requirements for responding to borrowers, let's go through them:
Federal regulations, as of 2014, now require servicers to respond to a written request for payoff statement within a "reasonable time" but no later than seven business days. TILA 1026.36(c).
But! Don't be tricked. Massachusetts regulations go one step further and require a response within five days. 209 CMR 18.21.
So when you receive such a written request, you'll need to provide an accurate statement of the total outstanding balance required to pay off the loan, and you'll need to do it quickly!
Error Resolution & Information Requests
Here's another relatively new set of timing requirements (not completely new, but expands on pre-existing Qualified Written Request requirements):
When a servicer receives a written letter asking either (a) to fix an error or (b) provide information about the loan, the servicer must follow these timing requirements:
Notice of Error
- 5 days to send written acknowledgement of consumer's notice
- 30 days to correct the error or determine that no error occurred and send written notification
Request for Information (other than payoff, see above)
- 5 days to send written acknowledgement of consumer's notice
- 10 days to respond with requested information if the consumer asked for the identify of and/or contact information of the current owner/assignee of the mortgage loan
- 30 days to provide any other type of information requested (or determine it is unavailable and provide written explanation).
1. Process Quickly to Save Paperwork
If you can respond to the borrower within 5 days (whether fixing an error or providing information), you can skip the 5-day acknowledgment. This is a small incentive to process these requests quickly.
2. Extension Available
Also, you can extend the time from 30 to 45 days if you send a different written notice within 30 days that tells the consumer you need more time to respond, including the reasons why.
3. Deal with "Kitchen Sink" Requests
Sometimes you'll get a letter from a disgruntled consumer that has decided to work with some out-of-state financial assistance company. That means you'll receive a long-winded letter reciting every possible regulation applicable and alleging violations of everything. This letter won't be adjusted to the particular loan and is just a fishing expedition.
Be careful ignoring a request like this. But also be careful not to let your team get bogged down with it.
A servicer does not need to respond to an "improper" request for information, which includes a request that:
- Is duplicative
- Requests confidential, proprietary, or privileged information
- Ask for irrelevant information
- Is overbroad or unduly burdensome
- Is untimely
A similar test applies for the Notice of Error requirements.
(There are detailed definitions of all of these, if you're going to ignore one of them, just be careful to follow the rules.)
In Other News
- Know any beginner or novice secondary market department personnel? SCA is running a training for Mass. Bankers Assoc. on Secondary Market Basics. I'm trying to attach the brochure here with more details- if that doesn't work e-mail me at BenGiumarra@scapartnering.com or Ben Craigie at BCraigie@massbankers.org for more information. The training is from 9:00 to 3:00 on October 25 in Marlborough and we'll work hard to have some fun.
- You know the CFPB is coming for payday lenders. Didn't mean too much to me and maybe not you. That's why I was surprised to find this counterattack so interesting. This is a research paper explaining why the payday industry is good for consumers and why the CFPB's efforts in this area are bad. Did you know the CFPB rule will put 15,000 payday lenders out of business? That it will reduce their revenue by 75%?
- I don't tell Dad Jokes very often. But when I do, he laughs ...
Seems crazy to me that the mortgage industry is "going grey," when the only thing I've ever experienced is selfless support from industry veterans. I can't imagine other industry newcomers wouldn't find a similar welcome wagon. Whenever I reach out for advice, I do so with trepidation, worried about taking time from someone's busy schedule. But to my surprise I've almost always found people willing to drop everything to help. Whether I'm calling to ask if mortgage is really spelled with a "t", or whether I want to understand why construction loans are packaged in separate phases, or why you would use different indexes with ARM loans, it seems someone more experience than me enjoys sharing that advice. Maybe at some point this will change, but I think I'm going to have many years ahead of feeling helplessly indebted to a great number of people. How can everyone be so busy but also so willing to help you with something completely unrelated to themselves?