In a few weeks the Consumer Financial Protection Bureau (CFPB) officially will open its doors, but it will be “months” before the agency promulgates any new servicing regulations, according to a top official there.
In prepared testimony slated for Capitol Hill Thursday morning, Raj Date, associate director for research, markets and regulation at the agency, offered no details on what servicing changes the CFPB may bring except to say the agency will “use its authorities to help ensure that all mortgage servicers have adequate systems and procedures to ensure compliance with federal law.”
The agency will regulate both depositories and nonbanks alike in servicing matters.
In his remarks Date also pondered the whole concept of selling servicing rights in the secondary market, saying that although there are “desirable aspects” to such liquidity, there are “practical” disadvantages as well – chiefly that consumers do not get to choose their servicer.
The CFPB associate director also discusses the issue of servicing fees, hinting that he is in favor of changing the current flat fee structure. Date says “…the current structure of servicing fees creates a strong incentive to underinvest in adequate technology, people, and processes to handle cyclical spikes in delinquencies. There are two important things to know about these servicing fees. First, the fees are fixed and typically do not go up if loans become delinquent and need more work. Second, these fees are not remotely high enough to properly service high volumes of delinquent loans.”
The Federal Housing Finance Agency and Department of Housing and Urban Development have been studying the issue of servicing fees since late last year. Suggestions on how to change the current 25 basis point fee structure for GSE loans will be unveiled in the next few weeks.