CFPB Updates Procedures for Examining Reverse Mortgage Servicers

The Consumer Financial Protection Bureau (CFPB) has issued new procedures for examining reverse mortgage servicers and reviewing their compliance with regulations.

The new procedures detail how CFPB examiners will review a reverse mortgage servicer’s compliance with applicable regulations and assess other risks to consumers, the agency stated in the 13th edition of its Supervisory Highlights report published on Monday.

“We recognize that reverse mortgages are a different financial product than traditional mortgages and, therefore, different federal consumer financial laws apply,” a CFPB spokesperson told RMD via email. “The publication of these procedures precedes supervision of reverse mortgage servicers.”

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CFPB’s Supervisory Highlights report focused on supervisory work completed by the Bureau between May and August 2016. Aside from issuing new exam procedures for reverse mortgage servicing, the report also highlighted issues CFPB examiners found in student loan servicing, auto loan origination and servicing, debt collection and mortgage origination.

The Bureau credited the release of the new exam procedures to complaints it has received from consumers relating to the servicing of reverse mortgages, though it did not specify how many complaints it has received, or the nature of the complaints.

The Bureau did, however, release the 29-page examination procedures for reverse mortgage servicing in conjunction with the release of its latest Supervisory Highlights report.

“These examination procedures apply to reverse mortgage servicing and are a stand-alone resource to complete a reverse mortgage servicing review,” writes the CFPB. “Prior to using these procedures, however, examiners should complete a risk assessment and examination scope memorandum.”

Depending on the scope, in conjunction with the compliance management system and consumer complaint response review procedures, each reverse mortgage servicing examination will include one or more of several “modules.”

These modules pertain to various servicing activities and procedures, including loan ownership transfers, escrow disclosures, account maintenance, consumer inquires, information sharing and privacy, events of default, among other areas of examination.

As Bureau examiners conduct their evaluations, they are responsible for three objectives, the first and foremost of which is to identify acts or practices that “materially increase the risk of violations” of Federal consumer financial laws in connection with reverse mortgage servicing and other risks to consumers.

Examiners will also be required to gather facts that help determine whether a regulated entity engaged in acts or practices that violate the requirements of Federal consumer financial laws; and will be responsible for determining if a violation of such laws has occurred and whether “supervisory or enforcement actions are appropriate.”

At the very least, the CFPB’s release of the new procedures offers transparency to reverse mortgage servicers, giving them clear direction on the key areas that examiners intend to scrutinize if/when they come around for an examination.

Access the CFPB’s exam procedures for reverse mortgage servicing here.

Written by Jason Oliva

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