74
I N D U S T R Y I N S I G H T / C R A I G N A Z Z A R O
Private-label servicing's growing popularity and the influx
of nonbank servicers spurs a host of regulatory concerns and
calls for increased guidance and oversight.
RAISING A RED FLAG
As compliance costs continue to rise for mortgage servicing,
so does the popularity of private-label servicing. As a product,
private-label servicing is not complicated. A subservicer will
service an institution's portfolio while retaining the bank's
branding throughout the entire loan life cycle, leaving the
borrower unaware of the identity of the subservicer.
is approach ideally affords the
originating lender the benefit of customer
retention through consistent brand recognition,
while simultaneously providing the institution
a lowered cost of compliance, since the act of
servicing—and therefore the compliance costs
associated with said servicing—is shifted to
the private-label servicer.
Private-label arrangements range from the
simple cobranding of billing statements that
include the institution's name and logo all the
way through private borrower-facing loan-level
websites, Automated Clearing House drafts,
credit reporting, and collection activity—all
done in the originating institution's name by
the subservicer. With the most comprehensive
offerings of private-label servicing, the
borrower would never know the subservicer
existed. e wide spectrum of how this
product may be offered begs for regulatory
guidance.
SEEKING THE CFPB'S GUIDANCE
Earlier this year, the U.S. Government
Accountability Office (GAO) issued a report
to congressional requesters Sen. Elizabeth
