United States

What mortgage servicing rules apply to me?

Sorting out the scope and impact of the new mortgage servicing regulations

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Confronted with the reality of mortgage-related rules stemming from the Dodd-Frank Act, some mortgage servicing companies hope they can fly under the regulatory radar rather than comply. They typically ask, "What mortgage servicing regulations apply to me?"

The short answer: Some of them, in the short run. However, the reality is that, in the long run, probably all of them eventually will apply.

That's not the answer that servicers want. However, our view reflects the unvarnished reality of the interlocking rules now in place through the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), among other agencies.

The new rules became effective this January, so their implementation and impact are still shaping up. Lenders of all sizes should pay close attention to them, based on the regulatory actions and negative media coverage aimed at mortgage servicers who are already subject to similar rules. If they ignore the rules, lenders will create significant reputational, operational and financial risk for themselves. After the turmoil of the financial crisis, no prudent management wants that.

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