Since 2012, the CFPB has published a Supervision and Examination Manual that contains guidelines for its examination of mortgage companies. These examination guidelines are similar to those published by other federal agencies, such as the Office of the Comptroller of the Currency. As the name suggests, the examination guidelines are guidelines for government auditors or examiners (in this case, CFPB employees) to utilize when they audit and examine entities subject to the CFPB’s supervision authority. However, these guidelines are a useful tool for mortgage companies to use as they design and implement their own compliance management systems, including internal audit and quality control programs. Since 2012, the CFPB has from time to time updated this Supervision and Examination Manual.
On October 31, 2016, the CFPB updated the Manual to release new exam procedures for reverse mortgage servicing. The Bureau will be using the following financial laws and regulations during the examination: Real Estate Settlement Procedures Act (“RESPA”); Truth in Lending Act (“TILA”); Fair Debt Collections Practices Act (“FDCPA”); Gramm-Leach-Bliley Act (“GLBA”); Equal Credit Opportunity Act (“ECOA”); and other risks that fall under unfair, deceptive or abusive acts or practices (“UDAAPs”). Like other areas that the Manual focuses on, the exam procedures for reverse mortgage servicing are broken down into modules. Below is a brief summary of each module that the CFPB will focus on during examinations.
Module 1: Servicing Transfers, Loan Ownership Transfers, and Escrow Disclosures
Examiners will use this module to assist with the review and determination of whether a servicer is providing the proper disclosures under RESPA, FDCPA and, if applicable, the loan ownership transfer notice.
Examiners also will use this module to assess whether a servicer honors a prior servicer’s loss mitigation agreement and whether a servicer accurately represents balances and remaining loan proceeds after transfer.
Module 2: Account Maintenance, Payments, and Disclosures
Examiners will use this module to review a servicer’s policies and procedures surrounding the assessment of fees and charges and how these fees and charges are communicated to the borrower.
This module will focus on compliance with Regulation Z’s Payment Processing Provisions for closed-end mortgages secured by a consumer’s principal dwelling and open-end credit. The module will also will assist the examiners’ review of how a servicer advertises as well as the placement of optional products’ costs and terms in advertisements. Finally, this module will assist the examiners’ review of whether a servicer provides consumers an accurate payoff statement upon request within a reasonable amount of time.
Module 3: Consumer Inquiries, Complaints, and Error Resolution Procedures
This module will assist the examiners’ review of: (1) whether a servicer has an adequate process to identify and escalate consumer requests; (2)compliance with Regulation X’s Notice of Error Provision and Written Information Request Provision; and (3) whether a servicer has an expedited process for borrowers facing imminent foreclosure.
Module 4: Maintenance of Escrow Accounts or Set-Asides and Insurance Products
Under the HECM program, some borrowers with limited income may be required to have a set-aside account for payments and taxes. This module will assist the examiners’ review of whether the information provided for the set-aside account is clear and understandable, and whether a servicer makes payments in a timely manner. This module will also assist examiners’ review and analysis of whether a servicer complies with Regulation X’s Escrow Disclosures and Force Placed Insurance provision, if applicable.
Module 5: Information Sharing and Privacy
This module will assist the examiners’ review of a servicer’s compliance with the Privacy of Consumer Financial Information Regulation and the FCRA Affiliate Marketing Rule.
Module 6: Events of Default and Death of Borrower
Under this module, the examiners will determine if a servicer falls under the definition of debt collector in the FDCPA, and, if so, whether a servicer contacts borrowers in an appropriate manner.
Next, the examiner will review whether a servicer has policies and procedures in place to avoid discrimination under ECOA; whether policy exceptions occur; and if a servicer has policies and procedures for servicing loans for borrowers who have limited English proficiency.
This module will also assist the examiners’ focus on the loss mitigation process, and whether a servicer communicates clearly to the consumer regarding payoff amounts and bankruptcy.
Finally, this module will also assist the examiners’ determination of whether a servicer responds timely to a successor of a deceased borrower and provides accurate information regarding payoff information. The examiner must also determine whether a servicer has in the past improperly referred a reverse mortgage to foreclosure upon death of a borrower.
Module 7: Foreclosures
For the loans in this sample, the examiners will focus on whether the borrower is in fact in default, and whether a servicer tells the borrower the correct amount owed.
Module 8: Examiner Conclusions and Wrap-Up
This module is used to summarize the findings, identify actions needed to correct violations, contact appropriate agency personnel regarding enforcement actions, and prepare a memorandum for the CFPB’s official system.
Find the full CFPB examination procedures for reverse mortgage servicing at: http://files.consumerfinance.gov/f/documents/102016_cfpb_ReverseMortgageServicingExaminationProcedures.pdf.