Bradley attorney Jonathan Kolodziej discussed monitoring fair servicing trends and providing more data access at a recent Mortgage Bankers Association servicing solutions conference covered in Inside the CFPB.
Kolodziej said historically servicers have had less access to data than lenders to conduct fair lending analysis. But as of March 1, the Federal Housing Finance Agency mandated that the government- sponsored enterprises require lenders to use the Supplemental Consumer Information Form to collect fair lending data that will carry across to servicers throughout the loan’s life.
Those advances, Kolodziej said, should improve the situation for servicers over time, even though the collection is voluntary for the borrower. He said regulators will use the data to identify disproportionate outcomes in loss mitigation, as evidenced by statements from the bureau about institutions’ ability to collect the data that have grown in intensity over time. He explained that as the FHFA data accrues and reaches “significant mass,” fair servicing implications will escalate.
“Once that happens, we’ll have a lot more discussion about best practices and how it’s being used on the ground either by servicers or taking away lessons learned from the regulator,” he said.
On one issue, pressure is already mounting: Kolodziej said Bradley’s CFPB-examined clients are
seeing their practices around LEP borrowers scrutinized in a new exam module. He also noted a January 2021 CFPB guidance that acknowledges the risk around service provision to LEP consumers.
“The biggest thing there is to be intentional and mindful and document everything you do. If you’re
going to provide a translated disclosure or deploy some new disclosure, don’t just haphazardly choose a particular language,” Kolodziej said. For example, he said servicers should have a “real reason” for using a translated disclosure, such as a given percentage of their portfolio requiring a particular language or even having employees that can translate into a particular language.
LEP compliance is a challenge for servicers, he said, especially over time. “If your compliance structure is entirely English speaking, you’re limiting yourself on how you can guarantee that those [translated disclosures] also are compliant, will meet the minimum policy and don’t say something that’s outside of the policy,” he said.
The CFPB is also pushing out model forms like early intervention model clauses. Servicers must ask themselves, he said: “Once the bureau puts out something as a model form, should we not at least consider making a decision about whether or not to adopt it?”
The article, “Regulators Looking at Servicers’ LEP Activities,” was published in Inside the CFPB on March 6, 2023.