The Consumer Financial Protection Bureau has issued guidance warning residential mortgage servicers and subservicers that CFPB examiners will be looking carefully at their compliance with federal law and focusing on specific areas related to servicing transfers. Bulletin 2013-1 responds to the "significant number of servicing complications" noted by the CFPB through consumer complaints and supervisory activities.

Federal Law Protections

Servicers are reminded that the federal laws with which they must comply include the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, and prohibitions on unfair, deceptive, or abusive acts or practices. Curiously, although the Equal Credit Opportunity Act (ECOA) is a major focus of the CFPB’s Mortgage Servicing Examination Procedures, the guidance does not mention the ECOA.

Nevertheless, servicers should also expect CFPB examiners to test their operations for ECOA compliance, including their processing and handling of loan modifications. The guidance warns servicers that the CFPB "will take appropriate supervisory and enforcement actions" to address federal law violations and "seek all appropriate corrective measures, including remediation of harm to consumers."

Areas of Examiner Focus

Servicers are advised that CFPB examiners will focus on the following three areas relating to servicing transfers:

  • A transferor servicer’s transfer preparation, which includes steps to ensure information is transferred in a way that is compatible with the transferee’s servicing system and that procedures are in place to ensure the transferee receives adequate information to avoid a servicing interruption
  • A transferee servicer’s handling of transferred files, which includes due diligence to ensure that the transferee conveys accurate information to consumers, has a  servicing platform that accurately reflects account-level information, and conducts post-transfer audits to confirm the proper transfer of data
  • A transferor’s and  transferee’s implementation of policies and procedures to prevent service interruptions for loans transferred during the loss mitigation process, such as procedures to ensure:
    • The transferee’s identification of loans in loss mitigation and receipt of information and documents related to such loans (including loss mitigation history and prior servicers' loss mitigation agreements and documents)
    • The transferee’s proper application of payments due under a loan modification agreement and consideration of such an agreement when conducting collection activity

Plans for Handling Servicing Transfers

Servicers are given "advance notice" that the CFPB "will, in appropriate cases, require servicers engaged in significant servicing transfers to prepare and submit written plans to the CFPB detailing how they will manage the associated consumer risks." The CFPB intends to use the plans to "assess consumer risks and inform further examination planning."

While noting that the circumstances of a particular transfer will determine the information to be included in a plan, the CFPB lists seven items of information it will generally request. Those items include descriptions of how the transferee will identify and correct errors in transferred information, the training plan and materials for staff involved in the transfer, and a customer-service plan for responding to loss mitigation requests and inquiries and identifying loans subject to a pending loss mitigation resolution or application.

Servicing Rules

Servicers are also reminded that the CFPB’s servicing rules, which take effect on January 10, 2014, will require servicers to maintain policies and procedures reasonably designed to ensure that information and documents are transferred in a form and manner that ensures accuracy and enables the transferee servicer to comply with its servicing obligations. Such policies and procedures also must ensure that a transferee servicer can identify and obtain any missing information and documents.

On March 28, 2013, from 3 p.m. to 4 p.m. ET, Ballard Spahr will hold a webinar, "The CFPB’s Servicing Transfers Bulletin: What the CFPB Expects from Mortgage Servicers." More information on the webinar and a link to register can be found here.

Ballard Spahr’s Mortgage Banking Group combines broad regulatory experience assisting clients in both the residential and commercial mortgage industries with formidable skill in litigation and depth in enforcement actions and transactions. It is part of the firm’s Consumer Financial Services Group, which is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.

The Group produces CFPB Monitor, a blog that focuses exclusively on important CFPB developments. To subscribe, use the link provided to the right.

For more information, please contact Mortgage Banking Group Practice Leader Richard J. Andreano, Jr., at 202.661.2271 or, Mortgage Banking Group Practice Leader John D. Socknat at 202.661.2253 or, or CFS Group Practice Leader Alan S. Kaplinsky at 215.864.8544 or

Copyright © 2013 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.







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