DS News - Digital Archives

» VISIT US ONLINE @ DSNEWS.COM COVER STORY INDUSTRY INSIGHT INDUSTRY INSIGHT and needs of their clients. This response will make for smoother sailing in the coming year. What Are the Risks? What has captivated the attention of an entire industry? It is risk and the fact that risk is now monetized and brought to reality much more quickly than once was the case. Borrowers face risks, and those risks can easily translate to servicer and investor risk. Flawed servicing practices can push borrowers into default and into a world of other troubles stemming from poor credit. Even a borrower's ability to get a job or buy a car to drive to work can be hampered. Investors know now that servicing practices can influence heavily the fate of the investor. The biggest penalty may be liability flowing to the investor from bad servicing. This risk goes beyond the assumed risk of losses and poor performance. The residential mortgage-backed securities (RMBS) investor's plight is a tough one—they take on liability and face losses for CFPB EXAMINERS WILL FOCUS ON NINE SPECIFIC MODULES IN THEIR EVALUATIONS OF MORTGAGE SERVICERS: Routine Servicing » Servicing transfers, loan ownership transfers, and escrow disclosures » Payment processing and account maintenance » Customer inquiries and complaints » Maintenance of escrow accounts and insurance products » Credit reporting » Information sharing and privacy POINT— COUNTERPOINT Larger and more sophisticated servicers have legions of staff and access to the best outside advisors, all well-qualified to delve into their processes and test their controls to ensure practices are up to par. Yet these are the very institutions that garnered some of the most shockingly high penalties to date. Penance for non-compliance, though, runs the gamut. Smaller servicers also have been audited and received harsh penalties as well as notices of subsequent and deeper reviews. With more limited resources, these firms have taken a wide array of approaches in response to increased regulatory risk, ranging from engaging the advisory services of law firms and consultants to hiring internal staff. Regardless of size or approach, none are immune to regulatory risk. All servicers can identify and assess key risk factors and options for managing and reducing risk. In doing so, servicers can chart a course that's still appropriate to their business models and risk tolerance levels while addressing the concerns TECH S ervicers can finally catch a breath after almost drowning in recent years under a sea of defaults. As marketplace turbulence settles, the strongest players are resurfacing and new competitors are jumping into the game. Regardless of their relative strength or maturity, all servicers face the stark reality of a daunting regulatory presence over all they do. Every servicer is focused on responding to heightened regulatory oversight, each with its own approach. MARKET PULSE As new regulations take shape, one thing's for certain: A clear, methodical response is key to tapering regulatory risk and preventing servicers from seeing red. Default Servicing » Collections and accounts in bankruptcy » Loss mitigation Foreclosure »Foreclosures 89

• Cover