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86 and fairness" that struggling homeowners are entitled to receive. While the deputy director suggested the CFPB would tread lightly on servicers trying in good faith to comply with a whole new regulatory paradigm, he cautioned that "A good faith effort, however, does not mean servicers have the freedom to harm consumers." In case the message was not clear, he reminded the audience that the new mortgage servicing rules are subject to federal supervision and enforcement, that compliance is a significant priority for the CFPB, and that it will be vigilant about enforcing the new regulations. He did not connect the dots and explain that the CFPB has an amazing arsenal to enforce the new CFPB regulations. It may bring administrative remedies available within the Truth in Lending Act and the Real Estate Settlement Procedures Act in which the new regulations are embedded. More importantly, it also has the general authority to impose civil money penalties of up to $5,000 per day, up to $25,000 for a reckless violation and up to $1 million per day for knowing violations. e CFPB believes these civil money penalties may be imposed on a per-loan basis. Like Antonakes predicted, the message he delivered was not well received by the audience, many of whom had spent nearly a year of their lives absorbed in implementing these extensive, hyper-technical rules and could have used a little encouragement for their efforts. ere are an abundance of detailed procedural requirements relating to, among others, force- placed insurance notices, periodic statements, and respondse to borrower's requests for information or errors. If a servicer fails to respond to a request for the identity of the mortgage loan owner within 10 days of the request (excluding holidays and weekends), the servicer has violated the law. If a servicer mistakenly inserts the account number on the periodic statement so that certain mandatory language is no longer in close proximity because of the intervening account number, the servicer is similarly caught. ere is no prescribed way to cure, and technical violations may be used by plaintiff's counsel to draw out contested foreclosures. Even in an examination by the CFPB, a "good faith effort" as evidenced by exemplary policies, procedures, and a robust compliance management system will not be enough if not properly implemented. Clearly, the industry is concerned with litigation and enforcement arising out of technical, non-material failures to adhere to the strict procedures established in the rules. e rules are too new to notice a surge in contested foreclosures that rely on alleged violations of the servicing rules. While a concern for the future, servicers attempt to anticipate how the new private right of action for servicing failures will impact their foreclosure and class action caseloads. In the meantime, there are a host of practical challenges in implementing the servicing rules that occupy servicers. One of the most taxing is executing the "one size fits all" loss mitigation evaluations so that it does not inadvertently harm borrowers. Ultimately, the rules are so unyielding that in some circumstances the servicer cannot promptly offer the borrower the loss mitigation option of his or her choice for which the borrower may qualify. With regard to borrower's choice, the CFPB asserts that it is inappropriate for borrowers to select a review for a singular loss mitigation option, fearing that borrowers do not know the other potential types available. In practice, such an approach that does not value the wishes of the borrowers potentially leads to borrower frustration. For example, under the servicing rules, if a borrower provides the servicer with a timely executed sales contract for a short sale for preliminary consideration, this sales contract reflects an application that is not complete. A servicer could not evaluate the borrower's incomplete application until either the application was complete or a "significant period of time under the circumstances [has passed] without further progress by a borrower to make the loss mitigation application complete." So instead of moving forward with the short sale contract, the borrower would be burdened by requests to provide income and financial documentation that ultimately may have no bearing on the viability of the short sale offer. In these situations, borrowers are not likely to feel that they were treated with "respect, dignity and fairness" when they must provide additional documentation for loss mitigation options they do not want, or wait until enough time has passed for a servicer to evaluate their requested short sale. Another common criticism from the industry is that the level of detail and complexity of the new servicing rules make it difficult to dovetail them with other requirements to which servicers are simultaneously subject, including state servicing and foreclosure laws, GSEs' default servicing guidelines, HAMP, NMS, and the requirements of the Federal Housing Administration (FHA). Some of the applicable federal governmental agencies have updated their servicing guidance to better align with the CFPB's servicing rules, but there are still known gaps. As was recently explained by the Mortgage Bankers Association in a letter to HUD, the FHA timelines to file the first legal action to foreclose do not give servicers sufficient time to complete all the servicing requirements set forth in regulation X. us, in many instances, by complying with the new loss mitigation rules, servicers will fail to achieve FHA's timeline for first legal action and be subject to interest curtailment and perhaps limits on expense reimbursement for mortgage insurance claims. In other words, one federal government agency is penalizing servicers for complying with another federal agency's regulations. Furthermore, as detailed and as sometimes prescriptive as the 450-plus pages of new servicing regulations are, they are only the beginning. e CFPB also has general authority to impose its unilateral vision of unfair, deceptive and abusive acts and practices, and it is not required to submit these subjective judgments to "notice and comment" rulemaking when exercising its supervisory or enforcement powers. e enforcement side of the CFPB is actively using this broad authority to go beyond the new regulations. Of course there are various state and federal initiatives focusing on the safety and soundness of state chartered, non- depository servicers and their capacity to absorb more servicing. In other words, even perfect compliance with the new CFPB regulations may not be good enough. Reasonable people may disagree on the propriety of the message delivered by Antonakes. Interestingly, he tempered his message in a speech this past June to the Consumer Advisory Meeting: "Our goal, however, is not some one- sided aim to maximize consumer protection or industry deterrence at all costs. ere is such a thing as doing too little, and there is such a thing as doing too much. We are seeking an appropriate balance where incentives for homeowners, creditors, and servicers are aligned." Let's hope this more-balanced approach guides the CFPB's actions as the industry continues to grapple with Antonakes' accurate assessment of the servicing industry, that "the fundamental rules have changed forever." "We have raised the bar in favor of American consumers and we are ready, willing, and able to vigorously enforce that bar…business as usual has ended in mortgage servicing." –STEVE ANTONAKES, DEPUTY DIRECTOR OF CFPB

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