The mortgage industry is calling for better alignment between the federal government and state of New York regarding proposed regulatory revisions that would affect local servicers.
In a joint letter to Department of Financial Services Superintendent Linda Lacewell, the Mortgage Bankers Association and New York Mortgage Bankers Association highlighted discrepancies in DFS' suggested changes to 3 NYCRR 419, which covers business conduct rules for servicing mortgage loans.
"While the proposed changes to Part 419 would emulate the relatively recent changes to the RESPA and TILA servicing requirements, we believe the implementation of the state-specific standards offered in the proposal would create consumer uncertainty, add additional costs, and produce possible deviations from federal law," the MBA and NYMBA said.
"Therefore, we are urging DFS to add a provision to Part 419 that states compliance with the Consumer Financial Protection Bureau's servicing rules constitutes compliance with DFS rules. In the alternative, we also encourage DFS to review the key differences in the proposed rule and federal law and modify the language to ensure consistency with federal law," the organizations wrote.
Over the course of nearly 10 years since Part 419's adoption, mortgage servicing regulations have "become much more robust with the implementation of an expansive federal framework of rules that protect consumers," they said.
Mortgage servicing rules implemented in 2014 by the CFPB and other state regulators serve as a uniform guide for servicers nationwide to address risks to consumers as a result of the foreclosure crisis. Additionally, a market surveillance program offers state regulators the opportunity to suggest enhancements.
The MBA and NYMBA summarized a number of issues with the Department of Financial Services' proposed changes in the letter, such as requiring servicers to deviate from a statement of account form offered by the CFPB instead of sticking to a uniform template. Other challenges include the requirement to send a consumer delinquency notice by the 17th late payment day, that provides little information or value and could dissuade customers from opening a future account, among other measures that would tack on time, risk and costs to the process.
"Servicers already have processes, procedures, and controls in place for complying with federal consumer protection rules. Adding additional requirements that deviate from current federal standards creates regulatory inefficiency by requiring servicers to construct new processes — and regulatory inefficiency directly impacts the cost and availability of consumer credit," wrote the MBA and NYMBA.
The organizations noted that small and midsized independent mortgage banks would be hit particularly hard should the amendments come to pass, as the institutions don't have as big a footprint to disperse the cost of compliance across a large servicing portfolio. They also requested an in-effect date of at least six months after changes are published to allow sufficient time for adjustments.
