Specialized mortgage servicers in the spotlight

The Consumer Financial Protection Bureau announced a number of new regulations pertinent to the mortgage industry so far this year, and to cope with the added responsibilities, some lenders are planning to outsource the work.

The Consumer Financial Protection Bureau announced a number of new regulations pertinent to the mortgage industry so far this year, and to cope with the added responsibilities, some lenders are planning to outsource the work.

Under some of the proposed changes, the CFPB requires servicers to assist distressed borrowers in the early stages of delinquency. It's believed this effort could help owners avoid foreclosure through a loan refinance or modification.

Since this lending regulation would apply to all mortgage professionals, not just the largest companies involved in the recent multibillion-dollar robo-signing lawsuit, this might create more work that many banks, especially smaller lenders, could struggle to address, CNBC reports.

"There's a finite amount of capacity in the servicing enterprise today, and the system by design was never set up to withstand these rates of delinquency, these high rates of foreclosure for an extended and protracted period of time which is where we’re at right now," Wingspan Portfolio Advisors chief operating officer Edward Delgado told the news source.

Many firms are now hiring third-party professionals to help cope with the demand, the report said. Meanwhile, other financial institutions are selling distressed loans directly to specialty servicers. It's believed these companies have the experience and resources needed to help troubled borrowers, and since it will be their only task, they will be able to dedicate more time to individual cases.

Other lenders feel helping troubled borrowers avoid foreclosure is totally outside their expertise and are enlisting the help of professionals to make the CFPB initiative work.

Meanwhile, certain experts believe as the government implements more rules for servicers, this could inevitably require a single large company to address these regulations and take the burden off of lenders, the report said.    

Mortgage delinquency, foreclosure still a troubling issue

Although the CFPB, among other government agencies, made great strides to assist borrowers in recent years, during the month of June, an estimated 5.8 million loans. were either delinquent or in some stage of the foreclosure process. This equaled roughly 12 percent of all residential mortgages.

In fact, there was a spike in borrowers falling behind on payments during the second quarter, which could be an indicator that even more potential home repossessions could occur during the latter half of the year.



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