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» In this category, servicers are already doing much of what is called for and, therefore, may not need much in the way of operating adaption to accommodate this rule. However, one interesting question that must be addressed is how to handle a change in the stage of delinquency associated with a loan. For example, if calculations of forceplaced premiums should become tied to the unpaid principal balance and the state of delinquency, a status change would become very important to the premium calculation. To illustrate this example, let's assume a borrower who is 60 days late is provided a premium estimate. However, shortly thereafter the borrower goes into a trial modification, requiring a new premium estimate based on the different percentage of the principal balance. Similarly, servicers must provide homeowners 45 days advance notice, with a quoted premium, prior to force placing insurance. In the 45-to-60-day interim between notification and actual placement of the insurance, a delinquent homeowner could become current, which would necessitate an updated premium quote. Same-Day Crediting Another of the proposed rules calls for servicers to credit a borrower's account the day a payment is received. The proposed rule states that if the consumer makes a partial payment, servicers are permitted to retain that payment in a suspense account. Once the amount in the suspense account equals one full monthly payment, the servicer would then have to apply the amount to the earliest delinquent payment. Same-day crediting is an entirely reasonable requirement and something that can be accomplished with little effort by the vast majority of servicers today. In fact, in leading servicing platforms there are ways to add "effective date" to payments even if a payment can't be posted the same day as receipt. At the same time, industry-leading systems can now ensure that late charges are not assessed, interest is only calculated through the effective date, 1098s can be adjusted if necessary, etc. In short, many of the tools are readily available to allow the industry to meet this requirement. VISIT US ONLINE @ DSNEWS.COM To meet [new ARM disclosures] servicers will need to be very clear in their communications to borrowers . . . . [F]igures quoted to borrowers can only be represented as an example—not their actual payment, nor even a projected payment. It will be essential that servicers take strong measures to ensure their customers understand what the numbers represent. Information Management In an attempt to minimize errors resulting from multiple servicing transfers, the CFPB is proposing its "Records Kept Up-to-Date and Accessible" rule. The informationmanagement policies and procedures proposed in the rule call for servicers to provide borrowers with accurate and timely disclosures. Servicers are required to maintain records of borrower contact, minimize errors, and promptly correct identified errors. Some small servicers may be granted exemption from the mandate of borrower contact records, according to the CFPB. Facilitate loss mitigation by accepting, organizing, and managing documents submitted in connection with the borrower's loss mitigation requests. Ensure reasonable and timely access to such documents and information by all appropriate loss mitigation personnel, and identify additional documents and information the borrower must provide to be considered for loss mitigation options. Many servicers have already taken steps toward implementing the information management systems and the policies and procedures needed to address these issues. The proposed "Errors Corrected Quickly" rule would require servicers to acknowledge notification by consumers of any errors within five days of receipt of that notification, and to conduct and conclude an investigation within 30 days. Shorter time frames would be imposed with respect to errors relating to foreclosures or payoffs. The CFPB gives a number of examples that qualify as errors falling under the quickcorrection rule: » Incorrect calculations of amounts due, credits, or payments » Payments (or non-payments) of taxes and insurance out of escrow accounts » Inaccurate disclosures » Inaccurate information about how a borrower can avoid foreclosure » Foreclosure procedures initiated or resumed after the borrower successfully completes a trial mod or remains current in a permanent loan mod or other plan Dedicated Assistance Finally, the CFPB is considering a rule that will require servicers to provide delinquent borrowers, or any borrower who asks for help to avoid delinquency, with direct, ongoing access to staff dedicated to servicing the needs of distressed borrowers. As the rule states, servicers would be required to provide the designated team with easy access to the borrower's records and give this team access to underwriters who could evaluate the borrower to determine eligibility for a loan modification or another option to avoid foreclosure. The primary impact to servicers is to ensure they have properly trained personnel who are both dedicated to the task of assisting distressed borrowers and have access to the records and resources they need to help them. By investing to train and recruit required staff members, implement appropriate supporting technology, and address workflow issues to improve efficiencies, servicers continue to make great strides in this rules category. Change will likely be a staple of the mortgage industry into the foreseeable future. Still, by taking the surprises out of mortgage servicing and ensuring borrowers have all the information they need to understand their loans and their options, the industry will continue to grow stronger and serve the nation's homeowners with pride. George FitzGerald is SVP of product management for the servicing solutions and technology division at Lender Processing Services (LPS). He has 26 years' experience in the mortgage banking industry, 19 of which have been with LPS. 85

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