Reminder Courtesy of New, Temporary Mortgage Servicing Change

Does your institution ever feel overwhelmed keeping up with regulatory change? If so, you’re not alone.  

Twenty percent of financial institution compliance pros would wish for fewer regulations if given the choice. That figure is even higher for smaller financial institutions, where 30 percent would pick having fewer regulations over more resources or even a bigger budget. 

Consider how the Consumer Financial Protection Bureau (CFPB) amended the Real Estate Settlement Protection Act (RESPA)/Regulation X to include temporary safeguards to assist mortgage borrowers affected by the COVID-19 emergency. The final rule was published in the Federal Register June 30, 2021, and is effective August 31, 2021—just one month later. 

The action is part of the CFPB’s effort to prevent avoidable foreclosures. It’s a very real concern since over 7 million borrowers have entered forbearance since spring 2020, and many of them are still struggling—yet the relatively short implementation timeline and numerous changes that need to be made pose a challenge for mortgage servicing. 

The regulation is 209 pages long and includes five key amendments to Reg X: 

• Temporary special COVID-19 procedural safeguards that must be met for certain mortgages before the servicer can make the first foreclosure notice or filing after delinquency. 
• Permission for servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete loss mitigation application. 
• Amendments to early intervention obligations to help ensure servicers communicate timely and accurate information to borrowers about their loss mitigation options. 
• Clarifying servicers’ reasonable diligence obligations to borrowers in a short-term payment forbearance program for those experiencing a COVID-19-related hardship based on the evaluation of an incomplete application. 
• Defining “COVID-19-related hardship” to mean a financial hardship due, directly or indirectly, to the national emergency for the COVID-19 pandemic. 

Related: The CFPB’s Focus on Avoiding Foreclosures: What You Need to Know 

Changes like these require time and resources to implement. First, someone needs to identify the regulatory change, read it thoroughly, and determine if it applies to the institution—in this case, mortgage servicing practices. 

Next, someone needs to determine how best to implement the changes and adjust policies and procedures to reflect those changes. Systems may need to be updated. Products and services may need to be created or adjusted, and employees will need to be trained to follow the processes.  

Implementation efforts must be monitored and reviewed to ensure the institution is complying with the new policies and procedures. And then, because the regulatory change is temporary, the institution needs a plan to revert to the old regulations when the time comes. 

Regulatory change management requires a lot of work and may distract from ongoing compliance efforts, but it doesn’t have to be this way. Here are four tips to streamline regulatory change at your FI: 

1. Have one source of truth for regulatory change updates. You could sign up for every industry publication, block out time once per day or week to skim them looking for updates, and then carefully read page after page of regulation to identify new changes and determine if they impact your FI.  

Or you can seek out a single solution that will manage every regulatory change, let you know if it applies to you, and provide you with a suggested implementation plan. This saves you from reading tens or hundreds (and sometimes thousands) of pages and lets you focus on how best to implement the change at your institution—not trying to decipher and understand what the regulation means and if it needs to be implemented at your FI. 

Related: 7 Ways to Cut Compliance Costs & Still Stay Compliant
 

2. Find a way to automate task reminders. You know what needs to be done and who needs to do it. Now you need to remind them—sometimes more than once—to get it done. Look for a solution that sends out automated reminders, saving you from having to manually send emails and track down employees to give them not-so-subtle reminders that there are compliance tasks that need doing.  

3. Track progress. You’ve got a lot to do and so does everyone else at your institution, but that argument won’t appease examiners if you fail to implement required regulations. Have a system in place for tracking every task and step of implementation, including policy and procedure approvals. Make sure there is a clear audit trail documenting who did what and when. Not only will it save you from having to ask each staff member if they got the job done, it will make board/management reporting and exam prep much easier. 

4. Monitor the results with a compliance review. Add the new rule to your compliance monitoring and review schedule so you can verify that new policies, procedures, and processes are effective. When you set aside time in advance, it helps ensure the job doesn’t get lost in the shuffle. It also allows for a proactive approach to quickly identify issues and make the necessary process changes before they cause a serious problem.

Related: Pivot! How to Build a Strategic Plan that Evolves With Your Financial Institution

Having a good change management processes as part of your compliance management system (CMS) makes it easier to stay on top of new regulations without neglecting ongoing compliance tasks.