MReport April 2018
26 | TH E M R EP O RT FEATURE the following proposed legislative bills will disrupt existing op- erational practices and necessitate updates to supporting technology platforms, automated solutions, and may even require manual intervention if servicers are not prepared to assimilate process changes. Workflow coupled with a workout rules engine transcends multiple facets of organizational process automation. Mortgage servicing operations that do not already have access to a workflow engine powered by business rules will find it difficult to continue to manage costs, facilitate easing regulations and remain competitive as legislation is passed and turns into rulemaking. π H.R. 125, FHA In-Person Servicing Improvement Act of 2017 The FHA In-Person Servicing Improvement Act would establish a pilot program to improve asset han- dling, and retention of delinquent Federal Housing Administration (FHA) insured loans by increas- ing direct communication with mortgagors, to include servicer compensation for related ex- penses. If implemented, servicing operational changes would at a minimum involve a system for tracking associated interactions, activities, timelines, and costs. π H.R. 1264, Community Financial Institution Exemption Act Depository institutions and credit unions with less than $50 billion in consolidated assets would be considered exempt from CFPB rules and regulations. In circumstances where these institu - tions retain servicing themselves, or under a sub-servicer arrange- ment, an exemption may not preclude them from being par- tially subjected to standard CFPB compliance. Segmenting out this type of client-based requirement is difficult on any level and is often cost prohibitive for smaller entities. π H.R. 2226, S. 2013 Portfolio Lending and Mortgage Access Act Amends the Truth-in-Lending Act (TILA) so that depository institutions are not subject to suit for violating Ability-to-Repay (ATR) requirements if the lender has consistently held loans on their balance sheet and prepayment penalties comply with limita - tions. Additionally, an originator would not be subject to suit if the lender is a depository institution and advises of their intent to hold the loan on balance sheet. Lastly, amends TILA to consider certain mortgage loans originated and retained in portfolio by an insured depository or credit union as QM eligible. Implementation under this legislation would impact ATR and QM eligibility determination, preset portfolio product guidelines, in addition to tracking and admin - istration of portfolio loans. π H.R. 3538 Mortgage Sale Transparency Act of 2017 Amends TILA to require notice of transfer to the bor - rower, liability exemption in the event of a transfer error, as well as a 90-day grace period for loan payments made by the borrower to the wrong lender. Already riddled with exception process - ing, further guidance that applies to the transfer of servicing will require sophisticated communica- tion, event and exception tracking management that will have to be automated and rules-based to ensure accuracy. π H.R. 3971 Community Institution Mortgage Relief Act of 2017 Passed by the House in December of 2017, amends TILA to create a safe harbor for escrow accounts for the payment of taxes and hazard insurance on loans made by depository institutions with assets of up to $10 billion, or where mortgages remained on a balance sheet for three years post origination. Servicers that handle 20,000 or fewer loans would be exempt from the Real Estate Settlement Procedures Act (RESPA) requirements regarding servicing and escrow account administration. Again, isolating out servicing requirements, in particular, escrow administration, for smaller entities is often cost prohibitive for servicers that may, in turn, try to mainstream pro- cesses. Intelligent workflow allows servicers to readily customize processes for any size originator. π H.R. 4607 Comprehensive Regulatory Review Act Reduces the 10-year require- ment to seven years for a comprehensive regulatory review of all regulations related to the insured depository institution or covered persons. These would abbreviate auditing timelines for many institutions, forcing them to hastily ensure compliance with changing regulation, investor, federal and state requirements. This scenario could be readily integrated and administered with automated workflow driven by business rules. Impact of the GSEs S ubject to Federal Housing Finance Agency (FHFA) oversight, Fannie Mae and Fred- die Mac will continue to pass on rules and guidance that modify existing operational practices. Although GSE changes typically yield updates for most industry technology platforms, implementa- tion practices are often incomplete or just not equipped to handle operational nuances that help ser- vicers ensure they are competitive, compliant, and cost-efficient. Both Fannie Mae and Freddie Mac updated servicing guidelines as recently as December 13, 2017, and have been diligent in making sure processes are simplified, remov- ing duplications and streamlining methods where feasible. This tra- jectory will continue as the GSEs strive to meet initiatives under the Fannie Mae, Freddie Mac, and Common Securitization Solutions 2018 scorecard. This year's score- card performance measurements include the finalization of fore- closure and short-term hardship alternatives as a part of the loss mitigation toolkit. The GSEs are responsible for developing plans "Mortgage servicers could be facing an entirely new set of obstacles, especially if unprepared for continued operational change. In a segment of the industry where profits are exceedingly thin, and the cost to service has risen year over year, managing to deregulation could prove to be a monumental challenge."
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