September 14th, 2017

CFPB – Consumer Complaint Best Practices
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COMPLIANCE HOT TOPIC

CFPB – Consumer Complaint Best Practices  

QUESTION:

The Consumer Financial Protection Bureau (“CFPB”) focuses on consumer complaints.  What are some best practices related to consumer complaint management?

ANSWER:

The CFPB has indicated that consumer complaint management is a key component of a mortgage lender’s complaint management system.  There are several proactive measures a mortgage lender should take to assist with consumer complaint management.  For instance, all mortgage lenders should maintain a detailed consumer complaint policy that outlines how the mortgage lender handles complaints.  Specifically, the policy should include the mortgage lender’s procedures with regard to identifying, acknowledging receipt of, and logging complaints, Further, the policy should detail the individual or individuals responsible for investigating and responding to complaints, timing requirements related thereto, and training of employees with regarding to handling of consumer complaints.  It is especially important to train front-line employees, such as processors and loan originators, as well as receptionists and other consumer-facing employees.  These individuals must understand how to initially respond and escalate the complaint to the appropriate channels.  Lenders that utilize borrower surveys should also strongly consider having their Compliance Department review such responses to identify any negative feedback and treat such negative comments as complaints.

In addition to a consumer complaint policy, it is important for mortgage lenders to maintain a consumer complaint log for tracking and trending purposes.  Information contained on the log should include, but may not be limited to, complainant name and contact information, the source of the complaint (i.e. borrower survey, CFPB complaint database, etc.), the employees involved, a brief description of the complaint and resolution, relevant dates (i.e. date received, date resolved), and particular issues involved (i.e. origination, servicing, fair lending, etc.).

The Company should review complaints regularly and any recognized trends should serve as a basis for the implementation of policies and/or training to help eliminate the potential root causes.  A common best practice is also to include a summary presentation of complaints as part of a mortgage lender’s Board of Directors’ or Senior Management meetings to ensure Board oversight and involvement.

Finally, it is important that mortgage lenders adequately monitor for complaints.  This includes ensuring employees understand reporting requirements in relation to complaints, as well as confirming contact information is up to date and accurate for various sources of complaints, such as the Better Business Bureau, state regulatory agencies and the CFPB complaint database.

 

TO SCHEDULE A TIME TO SPEAK WITH OUR TEAM
Reach out to:
Britt Haven
bhaven@mqmresearch.com or call
818.940.1200 Ext. 104.
or
Alan Ridenour
aridenour@mqmresearch.com or call
818.940.1210
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August 31st, 2017

AUS Reporting Requirements
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COMPLIANCE HOT TOPIC

AUS Reporting Requirements

QUESTION:

I understand the new HMDA rules require reporting of automated underwriting system (AUS) information effective January 1, 2018, but how do you determine what to report if we use more than one AUS or pull results several times?


ANSWER:

The new HMDA rules require the reporting of AUS information if a mortgage lender used an AUS to evaluate the application.  Below are guidelines for determining which AUS or AUSs and which result or results to report in such a case:

  1. Determine whether the AUS used to evaluate the application matches the loan type reported (i.e. Total Scorecard for an FHA loan).
    • If so, determine whether you obtained only one result from that AUS. If so, report that information
  1. If you used an AUS that does not match the loan type reported or if you obtained more than one result from the AUS that matches the loan type reported, determine whether an AUS that was used to evaluate the application matches the purchaser, insurer, or guarantor (if any) for the loan (i.e. Desktop Underwriter for a loan that Fannie Mae purchased).
    • If so, and you obtained only one result from that AUS report that information.
  1. If you did not use an AUS that matches the purchaser, insurer, or guarantor or if you obtained multiple results from an AUS that matches the purchaser, insurer, or guarantor or loan type, you report the result that is closest in time to the credit decision and the AUS that generated that result.
    • If you simultaneously obtain multiple results closest in time to the credit decision, you report each of the multiple AUS results that you obtained and the AUSs that generated each of those results up to a total of 5 results and 5 AUSs.  You should never report more than 5 results or 5 AUSs (in such case, only choose 5 AUSs and 5 results to report).
TO SCHEDULE A TIME TO SPEAK WITH OUR TEAM
Reach out to:
Britt Haven
bhaven@mqmresearch.com or call
818.940.1200 Ext. 104.
or
Alan Ridenour
aridenour@mqmresearch.com or call
818.940.1210

August 18th, 2017

COMPLIANCE HOT TOPIC

HMDA – Preapproval Reporting Requirements 

QUESTION:

Can you provide clarification on the definition of “Preapproval” under the new HMDA rules and information regarding reporting requirements?

 

ANSWER:

Effective January 1, 2018, the new HMDA rule expands the types of preapproval requests that are reportable.  Lenders who are required to file now must report preapproval requests that are approved but not accepted (this used to be optional).  However, preapproval requests regarding home purchase loans to be secured by multifamily dwellings, preapproval requests for open-end lines of credit, and preapproval requests for reverse mortgages are not reportable under the new HMDA requirements.  

You must report preapproval requests for home purchase loans (not for multifamily, open-end lines of credit or reverses) if reviewed under a preapproval program.

A preapproval program is a program in which you (1) conduct a comprehensive analysis of the applicant’s creditworthiness (including income verification), resources, and other matters typically reviewed as part of your normal credit evaluation program; and then (2) issue a written commitment that: (a) is for a Home Purchase Loan; (b) is valid for a designated period of time and up to a specified amount, and (c) is subject only to specifically permitted conditions.  Specifically permitted conditions include:

  1. Conditions that require the identification of a suitable property; 

  2. Conditions that require that no material change occur regarding the applicant’s financial condition or creditworthiness prior to closing; and  

  3. Limited conditions that (a) are not related to the applicant’s financial condition or creditworthiness and (b) you ordinarily attach to a traditional home mortgage application (such as requiring an acceptable title insurance binder or a certificate indicating clear termite inspection and, if the applicant plans to use the proceeds from the sale of the applicant’s present home to purchase a new home, a settlement statement showing adequate proceeds from the sale of the present home). 

Preapproval requests reviewed under a preapproval program are only reported if denied or approved but not accepted.  The CFPB indicated if you do not regularly use procedures to consider requests but instead consider requests on an ad hoc basis, you are not required to treat the ad hoc requests as having been reviewed under a preapproval program. However, you should be generally consistent in following uniform procedures for considering such ad hoc requests.

MQMR BRIDGES THE GAP BETWEEN RISK AND COMPLIANCE
TO SCHEDULE A TIME TO SPEAK WITH OUR TEAM
Reach out to:
Britt Haven
bhaven@mqmresearch.com or call
818.940.1200 Ext. 104.
or
Alan Ridenour
aridenour@mqmresearch.com or call
818.940.1210
Copyright © 2015-2016 Mortgage Quality Management & Research, LLC. All rights reserved.

Our mailing address is:
5900 Sepulveda Blvd.
Suite #432
Sherman Oaks, CA 91411

July 20th, 2017

Should mortgage lenders maintain and test a documented Disaster Recovery/Business Continuity Plan?

Yes, it is not only a best practice recommendation but also a requirement to be maintained and tested by many state regulators and the GSEs (Fannie Mae and Freddie Mac).  A formal Business Continuity Plan (“Plan”) should instruct employees who are the key contacts, what steps need to be taken, when to execute each step, where to go, and how to do so in the event of a significant incident or natural disaster that disrupts daily business.  The Plan should include detailed steps outlining where employees relocate for business resumption.  In many cases they may only need a computer and an internet connection.  A phone call tree and how employees can access a list of vendors and contacts critical to keeping the business running should also be a part of the disaster recovery component of the Plan.

The Plan needs to speak to the method utilized by the mortgage lender to ensure that, in the event of a data loss or security compromise to the main systems, the information is capable of being quickly recovered in the exact format as it was prior to the event.  If a physical backup facility is used it is recommended to be at least 25 miles from the main office in case a natural or man-made disaster affects an entire region.  At a minimum, the Plan should be tested annually.

June 27th, 2014

San Diego Legal Issues and Regulatory Conference Highlights
Introduction

MQMR is committed to process improvement and educating clientele.  MQMR recognizes there are opportunities to acquire knowledge and expertise from industry leaders that may not be easily accessible to our industry partners. As such, MQMR has created a high-level summary, which is the sole opinion of MQMR, of topics and information learned during the Legal Issues and Regulatory Conference for your perusal.

Background

From May 4th to May 7th MQMR traveled to San Diego, California to participate in the Mortgage Banking Association’s Mortgage Legal issues and Regulatory Conference. At the conference MQMR heard from speakers such as Alfred Pollard, the General Counsel of the FHFA, Kathleen Ryan, the Deputy Assistant Director of the CFPB, Bill Emerson, CEO of Quicken Loans, as well as many other speakers.

Major Topics at the Conference

Fair Lending

Throughout the Conference, the CFPB stated that they would be focusing on Fair Lending enforcement including Overt Discrimination, Disparate Impact, and pricing disparities. The CFPB stated any and all “players” are subject to scrutiny regardless of size or market share. The CFPB intends to enforce “Fair Servicing” just as aggressively as they enforce Fair Lending. However, as of now there are no direct requirements.

CFPB Oversight over Additional Areas

The CFPB has unrivaled authority to enforce federal financial regulation. The CFPB stated that they intend to enforce financial regulations. In the coming year, the CFPB is expected to focus on and enforce Loan Officer Compensation, RESPA, Servicing, TILA, Vendor Management, and HMDA Submissions. The overarching theme is that companies will be responsible for their vendors, and all risk is carried forward. A company should ensure they have authority to charge a fee, and should carefully consider if the fee is excessive, if it violates GSE allowable amounts, or if the fee does not compare to the fair market price for the fee.

The QM Rule

Kathleen Ryan, Deputy Assistant Director of the CFPB, gave a speech in which she stated that the CFPB believes that non-QM loans can be done responsibly and a market will open for that product. The CFPB is working on a proposal to allow for a cure if the 3% points and fees rules has been exceeded. The proposed cure is to allow a refund to occur within 121 days from the date the loan closed. There isn’t a proposed DTI cure yet; however, the CFPB is waiting on feedback from the mortgage community.

Vendor Management

Vendor Management is anticipated to be an area of increased focus by the regulatory agencies. Vendor service providers include Appraisers, Document Vendors, Website Vendors, Payment Processing Vendors, Contract Underwriters, and Attorneys, to name a few. Additionally, this will expand to ‘marketing partners’ that are not true vendors such as sellers of ancillary insurance products as well as previous vendors that are no longer being used. Each service provider carries various risks; compliance, reputational, strategic, transactional, and credit risk. Because of these layered risk factors, the CFPB has issued guidance on vendor oversight. The CFPB’s guidance expects lenders to continuously monitor, report and document their vendors. Failure to do so may cause enforcement action or civil penalties. The CFPB maintains a very strong focus on harm to the consumer.  As such, lenders should target vendor oversight on vendors that can cause the most harm to consumers including vendors that are critical to the daily operations that indirectly could negatively impact the consumer.   Calvin Hagins of the CFPB realizes that he does not expect companies to follow the CFPB and other regulatory guidance to the “t,” but that companies must identify key vendors and oversee them accordingly.  Contingency planning must also be considered.

Loan Officer Compensation

Lenders are be able to adjust LO compensation levels by using historical default rates such as EPDs or other performance metrics such as EPOs on loans originated by each LO to determine their compensation; however, the compensation cannot be adjusted retroactively—panelists were in agreement that “clawback” clauses violate many Fair Labor laws and suggested “progressively” adjusting compensation based on historical performance, if the lender wanted to pay based on quality. LO Commissions can be structured around specific BPS amounts. The CFPB will not allow LO compensation to be based upon anything that can be described as “steering.” A lender should look to perform a proxy test on various scenarios to determine if the LO has influence to steer a borrower into a transaction in order to be paid more. Scenarios failing that test should not be allowed.

Conclusion

The Legal Issues and Regulatory Conference provided MQMR with clarification on some highly technical regulatory laws. Clarification on the Fair Lending, the CFPB, the QM rule, Servicing guideline changes, Vendor Management and LO Compensation rules and laws is important because these topics will be an area of focus now and in the near future.We value our clients and vendor partnerships.  Please contact us if you have any questions on our opinions from this summary.

MQMR:
San Diego Legal Issues and Regulatory Conference Highlights

February 22nd, 2016

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For More Information Contact Casey Hughes
chughes@mqmresearch.com
(818) 940-1200 Ext. 104
info@hqvendormanagement.com

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September 3rd, 2015


Major Changes on the Horizon

Dear Clients, Partners, and Friends:

As part of SQC’s commitment to servicing oversight, SQC will periodically send informative memos to our partners.

In the recent months, SQC employees have attended the Single Family Housing Handbook Forum on July 22, 2015 and the Western Servicing Conference on August 3, 2015. In both cases, SQC focused on the impact that the Single Family Housing Policy Handbook will have to servicing oversight. 

A short description of the Single Family Housing Policy Handbook (4000.1):
HUD is changing the entire structure and layout of the Federal Housing Administration (FHA) origination, servicing, and auditing process. The entire structure is due to be unified and rendered uniform in the “Single Family Housing Policy Handbook.” HUD anticipates that the Handbook will be the single “authoritative” document that all stakeholders can refer to for their FHA business.

What does the Handbook address?:
The majority of the Handbook is devoted to origination. However, HUD has made some changes to the timing of the servicing loan level quality control (4000.1(V)(A)(3)(e)). In addition, HUD has made changes to the selection criteria (4000.1(V)(A)(3)(a)). Currently, SQC is reviewing the changes to the auditing structure as identified in 4000.1(V)(A)(3)(e) and 4000.1(V)(A)(3)(a). SQC will have feedback regarding the changes to the auditing structure within the next few weeks.

FHA Forum
To augment SQC’s understanding of the Handbook, SQC attended the FHA Forum in Cypress, California on July 22, 2015. The primary focus of the Forum was with regard to the origination process of FHA loans. However, a portion of the Forum was dedicated to QC, oversight, and compliance. Some highlights:

  • HUD has allotted 60 days from the end of the month in which loans were selected to complete the servicing analysis. An initial findings report must be provided to senior management no later than 30 days from the end of the previous 60-day time allotment. The final report must be issued within 60 days from the date the initial findings were reported.

  • HUD expects fraud and material misrepresentations in servicing to be reported immediately.

  • HUD describes a “material finding” in servicing as something that has an adverse impact to the property. Conversely, HUD describes a “material finding” in origination as something that impacts eligibility or insurance with FHA.

  • The changes to the QC and origination section go into effect September 14, 2015, while the changes to the default servicing portion of the Single Family Housing Policy Handbook will be published in March, 2016.

Western States Servicing Conference
SQC employees attended the Western States Servicing Conference in San Diego, California from August 3-5. Among the featured speakers were representatives from Fannie Mae and the CFPB. The conference was a great opportunity to learn and stay abreast with new developments in mortgage servicing.

Truth-in-Lending Integrated Disclosure (TRID) 
The Truth-in-Lending Integrated Disclosure (TRID) changes have rattled the mortgage industry for several months. By now, most lenders have prepared for the TRID impacts on production. Mortgage servicing will be minimally impacted by TRID today as compared to originations. To that end, SQC will change the document request list to include the Closing Disclosure. Under TRID, the Closing Disclosure replaces the HUD-1. A formal announcement will be sent soon.

Copyright © 2015 Subsquent QC, All rights reserved.

August 26th, 2015

Watch Our Video on Vendor Management!
SHED SOME LIGHT ON YOUR VENDOR MANAGEMENT PROGRAM

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Whether you need a fully outsourced program or partial support, HQVM provides a solution tailored to your needs.

HQ Vendor Management: 
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June 15th, 2015

Compass

Mortgage compliance requirements continue to expand while lenders are left to keep up.

MQMR provides compliance expertise and support to assist lenders in developing, building, and maintaining a comprehensive compliance program to mitigate exposures presented by changing regulatory requirements.

COMPLIANCE SERVICES:

-Monthly Compliance Support and Assistance

-Marketing Services Agreement (MSA) Review

-CFPB Mock Audits and Preparation

-Policies, Procedures and Manuals

-AML Independent Testing

-LO Comp Agreements

-Independent QC Test

-CMS Development

-GSE Applications

-Internal Audit


Don’t Wait. Engage MQMR For Your Compliance Needs Today.

June 1st, 2015

Servicing QC – Constant Monitoring – Servicing Oversight
Servicer compliance is at the forefront in today’s regulatory environment. The GSEs have recently issued best practices for servicing oversight, and one thing remains clear;
Oversight and constant monitoring have never been more important.
Subsequent QC provides a solution for constant monitoring and oversight so you have the tools to effectively manage your servicing performance:
  • Loan-level servicing QC audits.
  • Trending analysis to identify systemic issues.
  • Clear and concise reporting for Senior Management.
  • Continual portfolio surveillance from new loan boarding to payoff, and default.
Engage Subsequent QC for Your Servicing Oversight!
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