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23 » VISIT US ONLINE @ DSNEWS.COM Jordan Dorchuck is Executive Vice President, General Counsel, and Chief Compliance Officer for BSI Financial, where he leads the company's regulatory compliance program and vendor management operations. Prior to joining BSI Financial, Mr. Dorchuck held positions as Executive Vice President and General Counsel of several mortgage banking companies, including Homeward Residential and Aurora Loan Services. In the face of an ever-increasing number of federal and state regulations and licensing requirements, what do you see as the most problematic compliance issues? It has become painstakingly obvious that one of the biggest compliance-related issues facing servicers is the cost, time, and resources needed to establish an effective infrastructure to manage the increase in regulations. Servicers have stepped up their game and have expanded their legal and compliance and audit and QC areas to handle all the extra work that is needed to manage compliance-related matters. But, operations areas also need to build effective quality assurance and embed additional controls in the process itself to be able to document and demonstrate its heightened attention to developing effective processes to manage and control regulatory risk. From reading the CFPB regs and commentary, CFPB supervisory highlights, and the CFPB Bulletin 2014-01, I think that one of the most problematic compliance issues is how transferee servicers can effectively and seamlessly assume servicing for borrowers that were in some stage of loss mitigation evaluation at the time their loans were transferred. e CFPB has made it clear that they expect the successor servicer to be able to treat the borrower pretty much as if there had been no change in servicing.ey expect the successor servicer to comply with tight deadlines and locate the documents that the borrower had submitted to the prior servicer and pick up the loss mit discussions pretty much where the prior servicer left off. at will require a good deal of moving parts all working together. Are there specific regulations that more easily lend themselves to litigation if not properly navigated than others? By mere crafting of the statute, yes, there are some laws and regulations that provide for a private right of action and attorneys' fees and, therefore, can serve as an invitation to litigate. Additionally, many consumer laws and regulations provide for enough gray area that depending on the state or circuit, you may or may not clearly be in compliance. FDCPA and all the cases regarding leaving voice mail messages is just one example. Mortgage banking litigators could devote a panel session in a seminar to this question. When violations inadvertently occur, what are the most effective ways for servicers to avoid penalties? Early intervention is one of the most effective ways. If a servicer has effective controls in place to identify a potential violation or a newly occurring violation at the outset, then the servicer should be able to spring into action to remediate where possible and reform the processes where needed. e CFPB and other regulators must understand that errors will sometimes occur notwithstanding that the servicer has in place diligent and responsible processes designed to avoid errors. It is what the servicer does once an error has been detected that is important. A casual approach to treating borrowers that have been disadvantaged will not be viewed kindly, but everyone knows that. A responsible remediation program goes a long way toward avoiding or minimizing penalties. Of course, the details are important and legal counsel is usually required to develop appropriate remediation steps after taking into account all the relevant facts of a situation. What role does common sense play in regulatory compliance? Is it necessary for all employees to gain a sophisticated understanding of each change to the regulatory landscape? Common sense plays a critical role in regulatory compliance for both employees of servicers and for regulators, too! My own personal view of the CFPB, based on my reading of their regulations, commentary, and official interpretations and based on my many conversations with Laurie Maggiano and others, is that the agency has done an excellent job of applying common sense and of being fair and reasonable with their servicing rules and their expectations from servicers, in general (I can't comment on how they have acted with respect to any individual servicers, however). e agency has certainly been transparent – it is all about the borrower experience and we understand that, and they seem to have adopted a common sense approach to their rules, taking into account the needs of and protections for the borrower while also taking into account industry comments and concerns. eir regs are balanced and for the most part require servicers to act in a way that most reputable servicers had been acting even prior to the regs being promulgated anyhow. As for employees, I think it is beneficial for all employees to have a good foundational understanding of the regulatory landscape and the issues and concerns highlighted by the CFPB, that is, by providing prompt communication and doing so in a clear manner. I think having management with a more in- depth knowledge of the landscape allows for a clearer insight as to how potential rule changes will affect the operations and will allow a better dialogue with the CFPB for future changes and proposals. Certainly, it is the role of regulatory compliance at each servicer to alert the business units to changes that will affect the business and to educate the business so that they gain an appropriate level of understanding. Sometimes, the business folks in the trenches will need to develop a sophisticated level of understanding, and sometimes not. I suspect that it will depend on whether a process is automated or not or whether the particular regulation allows for discretion on the part of the servicer. What do you anticipate are the biggest changes coming relative to compliance in 2015 and how do you see that affecting both the consumer and the industry itself? e CFPB has signaled what they consider to be the biggest changes with respect to compliance in 2015 with the proposed rules that they issued on November 20, 2014. While some of these rules merely clarify existing regulations, some might reach further than others in their effect on servicing processes and practices. One proposed rule would have servicers change their periodic statements, which will require IT fixes. Another deals with how to handle loan modification applications that were pending at the time of servicing transfers. After all the recent servicing standards were adopted and after all the recent scrutiny about lender placed insurance, and after all the attention on loss mitigation processes, I cannot anticipate other changes to compliance in 2015 other than with respect to ensuring that borrowers are not negatively impacted by servicing transfers and other than further scrutiny on existing processes, to ascertain that they work effectively to allow loan servicers to provide reasonable service to their borrowers.

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