National mortgage servicing standards mean big changes for lenders

In a recent hearing to discuss national mortgage servicing standards, Senate Banking Committee Chairman Tim Johnson, Democrat from South Dakota, partially blamed mortgage lenders for the stall in the housing recovery.

"We need rules of the road so that borrowers, investors and services have a clear understanding of the process to follow both when a borrower is current on payments and also in the unfortunate event that a borrower becomes delinquent," Johnson said.

According to the chairman, the national standards would help prevent inaccurate lender evaluations, litigation risks for investors and lenders and improper filing of paperwork.

Starting in November, federal bank regulators, the Federal Housing Administration, Fannie Mae and Freddie Mac have been implementing new regulations for mortgage providers. The new rules include standards to improve customer service for borrowers, and mortgage service report cards issued through the Treasury Department's HAMP program.

Still, small banks and credit unions are asking for exemption from the new standard because they do not believe they were the cause of the recent housing crisis. Jack Hopkins, CEO of CorTrust Bank, told Housing Wire that forcing his bank to do additional reporting and documenting would stretch already thin margins even thinner.

Faith Schwartz, the executive director of the Hope Now Alliance, told the news source regulators, state attorneys general and other rule makers should participate in the drafting of the standards to ensure uniformity. 

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