CFPB Issues Guidance on Mortgage Loan Transfer Process

The CFPB recently issued an outline of mortgage servicer practices to follow when transferring residential mortgages.  According to its press release, the outline is meant to provide clarity, facilitate compliance and prevent consumer harm.

The CFPB’s guidance addresses: (i) transfer-related policies and procedures; and (ii) loan information and documents for ensuring accuracy.  Regulation X requires transferor services to maintain policies and procedures related to the timely transfer of information and documents and that enable the transferee servicer to comply with servicing obligations.  In addition, a transferee servicer must also maintain policies and procedures to ensure that it can identify necessary documents or information that might not have been transferred. The transferee servicer must obtain missing information from the transferor servicer.

The guidance includes examples of policies and procedures that the CFPB considers to be reasonably designed to achieve its regulatory requirements.  Some of the suggested practices outlined by the CFPB include: (i) developing a servicing transfer plan; (ii) post-transfer quality control and validation of data; (iii) determining servicing responsibilities for legacy accounts; (iv) monitoring consumer complaints and loss mitigation performance metrics; and (v) identifying any loans in default, active foreclosure, forbearance, and bankruptcy.  

The CFPB encourages the use of a uniform data standard, such as the Mortgage Industry Standards Maintenance Organization standard, as it may provide more data field consistency across servicers.  Such consistency could result in higher data compatibility and compliance.  In addition, Appendix A to the guide lists examples of common data elements that should be transferred or received for each of the following categories: (i) foundational loan information; (ii) investor information; (iii) escrow accounts; (iv) private mortgage insurance; (v) FHA insurance; (vi) hazard and flood insurance; (vii) loss mitigation; (viii) foreclosure; and (ix) bankruptcy.

The CFPB recognizes that the COVID-19 pandemic may present certain challenges and states that the agency will be sensitive to servicers’ good-faith efforts to transfer servicing without adverse impact to consumers.