Alert March 04, 2014

Congresswoman Urges OCC to Scrutinize Mortgage Servicing Rights Sales to Nonbank Servicers

Congresswoman Maxine Waters, who serves as the ranking member on the House of Representatives Committee on Financial Services, sent a letter to the Office of the Comptroller of the Currency and the Office of Mortgage Settlement Oversight urging them to carefully scrutinize the sale of mortgage servicing rights from banks to nonbank servicers to ensure that nonbank servicers have the capacity to handle the increased loan volume and that borrowers are not harmed by the fewer protections afforded to them as a result of the transfers to nonbanks. The letter follows a recent decision by the New York Department of Financial Institutions to prohibit the sale of mortgage servicing rights from a bank to a nonbank that had been the subject of an enforcement action by the CFPB and several state regulators related to improper mortgage loan servicing, unauthorized fees, and engagement in unfair and abusive foreclosure practices (see December 23, 2013 Alert). Among the many alleged violations contained in the consent order, the CFPB alleged that the mortgage servicer failed to honor permanent and/or trial loan modifications that were entered into prior to the transfer of the servicing rights. The letter also drew the recipients’ attention to the concern that transfers by banks subject to the National Mortgage Settlement to nonbanks would mean the underlying loans would cease to be subject to the National Mortgage Settlement and therefore, no longer subject to the servicing protections provided by the National Mortgage Settlement.