Mortgage Finance Blog

By the end of 2008, the banking industry found itself in a rather precarious position. Only the strong, larger entities stood the chance of survival while even some of those large players tumbled. We find ourselves in 2014, almost seven years after what most industry professionals coined as the “apocalypse.” Although some industry regulation took place between 2008 and present, most of the Dodd-Frank Act changes in mortgage servicing were implemented this past January.  

Now that Dodd-Frank is thoroughly implemented, most board members of the larger banks are now focused on seeking closure to the never-ending legal disputes. The U.S. government and individual states have settled a recent lawsuit with JP Morgan Chase for a cool $13 Billion. While Bank of America is on deck for roughly $23 Billion by the end of this month. Perhaps the settlements are appropriate as so many people were mistreated, disrespected, and misrepresented as in the robo-signing controversy.

But, when is it going to be behind us? After all, the success of banks and the entire financial industry truly helps our economy, from individual market investors to Real Estate as a whole. So are we ready to move-on? 

The Consumer Finance Protection Bureau (CFPB) is the agency created under the Federal Reserve System that enforces the Dodd-Frank Act across the finance industry. After seven months of implementation, most of the changes have become routine across the industry. Here are just three examples of how mortgage servicing has changed:

• 60 - Sixty-day notice before interest rate adjustments are scheduled for your loan. This is beneficial for those who require notification so that the consumer could plan accordingly.  Usually 30 days is enough to refinance, if a consumer wishes to sell his/her home, sixty days may not be enough time to avoid at least a few months of fully-indexed rates.
• 45 - Forty-five days notice before charging the mortgage customer for force-placed insurance. A home owner’s insurance policy may expire unexpectedly. Especially, if the bank is paying the insurance and taxes out of the monthly payment (escrow account). The bank must notify you within 30 days that the policy has expired and will provide the homeowner with 15 additional days to acquire proper coverage instead of charging the homeowner for the optional, more expensive coverage. 
• 36 - Thirty-six days after a consumer’s late mortgage payment, the bank will reach out to the homeowner. Within 45 days, the homeowner will be assigned personnel to assist in determining options to bring their payments current. If there had been a method in place to help as many people as possible, it is the Bureau's belief that there would have been substantially less foreclosures. Bank personnel are actually in a position to help and work out payments that are fair to everyone whether a borrower had been laid off or if there has been a death in the family. 

The Dodd-Frank Act has changed the industry forever. Most of the changes were absolutely warranted since the previous structure was simply very poor in determining the responsibilities of all parties. Considering the onslaught of changes across the industry, the costs incurred by banks to redesign infrastructure, in addition to the possible $60B in total settlement costs, is it time? Can we move-on?