e-brm msr mortgage default servicing in the new cfpb respa world
DESCRIPTION
Default servicing is a small part of residential mortgage servicing but an important one. Legacy servicing applications are ill equipped to handle default servicing at the State, Bankruptcy District, County and Local level. E-bRM applications identify the legal status of your default loans and help you make the correct decisions based on the the laws that apply to that case, in that place, at that time.TRANSCRIPT
Credit Default Mortgage Account Administration Management (CDMAAM) & Bankruptcy Mortgage Account Administration Management (BMAAM) in a RESPA Environment
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The Default, Bankruptcy Harm, RESPA Tasks
• Looking Back Determine level of mortgages with processing and recording problems
that may have resulted in inaccurate payment applications and balances Identify actual mortgages and borrowers affected
• Looking Forward Institute risk management practices to control future processing and
recording problems and issues Install automated data capture, tracking and monitoring to maintain “real
time” documented files and continuously check for out of sequence events and patterns
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Tip of the Iceberg
• But that is only the tip of the “cash flow” iceberg – Some other questions:
What about the split between principal and interest? What about funds that were escrowed? Were they applied
correctly to taxes and property insurance? Were payments applied first to principal and interest or to
penalties? Were all the rate changes applied and correctly initiated? Were there other fees and penalties and were they calculated
correctly? Was the servicing purchased? Are all the records on one system? Were there advances made? Did they influence timing of the other
payments?
• Retrieve all payments made by borrower – a straight forward task
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Finding Needles in Haystacks• Mortgage servicing in general and default
servicing in particular have numerous dynamic rules-based events with very specific outcomes that must occur
• When servicing issues develop they will be complex in both information and timing
• Trying to find and correct problems in a mortgage servicing file that deviate from the required process and timing is like trying to find needles in not just a haystack but multiple haystacks
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Finding Needles in Haystacks The loan file and supporting sub-files have many different
documents, event benchmarks, and fee rules driven by the type of loan, the state in which it was originated, the programs it was originated under and the ultimate investor
Everything associated with the loan usually resides on a number of different systems of record in numerous locations, many controlled and maintained by different parties – previous owners, vendors supporting the various efforts, states and counties, and courts of various jurisdictions
The challenge is not just finding the needle but finding many needles in many haystacks and then matching them to one another
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Literally Years to Search by Hand• Laborious task to create
paper time lines / pencil ledgers
• Even for trained analyst that knows what to look for
• Data retrieval and sequencing tasks can be automated
• Automation is repeatable, traceable and auditable
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Loan Compliance Process Automation
• Objective: • Improved processing speeds and accuracy • Promote transparency
• Template driven requirements and process:• Find what is required / relevant• Sequence of events over life of the loan (chronology)• Documents and data (internal and external artifacts)• Loan related cash flow events
• Understand access and retrieval protocol • Write unique program routines to accommodate
retrieval and organization
© 2013 E-bRM, LLC - CONFIDENTIAL
Loan Compliance Template• Line up events along key time lines
• Compare time lines requirements with actual timing and flag exceptions
• Identify documents and data• Missing documents by loan file• Incomplete documents by loan file
• Transaction cash flow events• Payment history• Escrow funds and advances• Penalties and charges
• Organize and deliver to analytic tool set and reporting• Client designed or specified
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Access Data from a Variety of Sources Collect data from a variety of relevant
datastores:
ClientSOR
MERS PACER DoD
CMDRConsumer Mortgage Data Repository
OtherVendorPortals NDC
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Assemble Time Lines All the associated events, documents and fees
need to be properly sequenced on the mortgage file time line to identify potential processing issues.
Default Events Active Duty Service BK Filing Sale
Escrow Payment
Notice of Default
Property Maintenance
Property Tax Payment
Notice of Trustee Sale
Promissory Note
Deed of Trust
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Line Up the Associated Time Lines Line up time lines for servicer, borrower, military, courts … Because the loan file has been handled by a number of entities,
several important fees, notices, or actions may be out of sequence.
Report problem loans
Escrow Payment
Notice of Default
Property Maintenance
Property Tax Payment
Notice of Trustee Sale
Promissory Note
Deed of Trust
Title Search
Bankruptcy Filing
Default Events Active Duty Service BK Filing Sale
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Process Model• Identifying Data• Tagging Data• Tracking Data• Retrieving Data• Organizing Data• Delivering Data
Identifying, correcting, monitoring and preventing key risks in real time.
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Key Servicer Use Cases
1. Bankruptcy (BMAAM), RESPA Compliance
2. Ongoing SCRA Compliance
3. HAMP Application Process Compliance (CDMAAM)
4. Historical Payment Application Accuracy
These represents a partial list of potential uses. Others include penalties, charges, third party payments accuracy and proof testing, as well as many other client specific applications.
© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 1: Bankruptcy Compliance
Problem Scope: Objective: In the event a borrower filed bankruptcy prior to or
during any foreclosure action by the servicer, determine if servicer complied with bankruptcy requirements.
Problem Set: Legacy Portfolios Concerns to Identify: RESPA violations; Stay violations
(actions and communication); Assessed charges (Proof of Claim); Application of funds and stewardship of escrowed funds. Property sale or eviction
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 1: Bankruptcy Compliance
Solution Automation:• Use E-bRM Template to determine relevant data points:
Foundational documents (note, mortgage)
Performance documents (payments, escrow, fee statements, balances)
Communication documents (notices, orders)
Court documents (jurisdiction, proof of claim, bankruptcy plan, etc.)
• Identify Required / Relevant Data Sources PACER
Servicer Platform (note, mortgage, payment, escrow, foreclosure docs)
Other (DoD for SCRA, as required)
• Retrieve Data
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 1: Bankruptcy Compliance
Solution Automation (continued):• Organize all data points on time lines:
Borrower: original purchase, payments, insurance, taxes …
Servicer: payment allocations, escrow, notice of default, RESPA …
Court: claim filing, stay orders, principal reduction, bankruptcy plan …
• Overlay individual time lines and identify data that does not match the E-bRM timing template Double dipping on escrow recovery (RESPA, including 21 & 180 day
notices, Borrower pyramiding)
Foreclosure action started / resumed during bankruptcy
Principal / interest does not match bankruptcy plan
Payments not applied in accordance with proper court jurisdiction / plan
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 1: Bankruptcy Compliance
Solution Automation (continued):
• Provide report of all mortgage case files identified with potential irregularities
Case Identification
Time Lines
Log of Potential Errors
Mortgage Document Repository Data Folder (all collected documents)
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 2: SCRA Compliance
Problem Scope: Objective: In the event a borrower was a active
military service person during a period of the loan, determine if servicer complied with SCRA requirements.
Problem Set: Legacy portfolios and go forward processing rules
Concerns to Identify: Improper foreclosure action, failure to adjust rates and fees.
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 2: SCRA ComplianceSolution Automation:• Use E-bRM Template to determine relevant data points:
Foundational documents (note, mortgage)
Performance documents (payments, escrow, fee statements, balances)
Communication documents (notices, orders)
Military Service data / documents (dates, status, orders)
• Identify Required / Relevant Data Sources DoD (or DoD data extract) for active service records
Servicer Platform (note, mortgage, payment, escrow, foreclosure docs)
Other (MERS, PACER as required)
• Retrieve Data
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 2: SCRA ComplianceSolution Automation (continued):• Organize all data points on time lines:
DoD: active duty start and end dates, service branch, identification Borrower: original purchase, payments, insurance, taxes … Servicer: payment allocations, escrow, notice of default, RESPA,
foreclosure …
• Overlay individual time lines and identify data that does not match the E-bRM timing template Interest rate not properly adjusted to the SCRA maximum Fees charged separately, not properly included in reduced interest rate Rate and fee reductions not properly applied retroactively to service
dates Family member of service personnel, not discovered and protections not
properly applied to loan
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 2: SCRA ComplianceSolution Automation (continued):
• Provide report of all mortgage case files identified with potential irregularities
Case Identification
Time Lines
Log of Potential Errors
Mortgage Document Repository Data Folder (all collected documents)
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 3: HAMP Process Compliance
Problem Scope: Objective: Determine if servicer complied with
HAMP notification, calculation and processing rules Problem Set: Legacy portfolios and go forward
processing Concerns to Identify: re-default events, NPV
calculation not completed, notices that recommend defaulting, rate, term and principle modification issues, denial decision support
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 3: HAMP Process Compliance
Solution Automation:• Use E-bRM Template to determine relevant data points:
Communication documents (notices, letters, foreclosure notices)
Foundational documents (note, mortgage)
Performance documents (payments, escrow, fee statements, balances)
• Identify Required / Relevant Data Sources Servicer Platform (note, mortgage, payment, escrow, foreclosure docs)
Servicer Document Image System (correspondence, notices)
• Retrieve Data
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 3: HAMP Process Compliance
Solution Automation (continued):• Organize all data points on time lines:
Borrower: original purchase, payments, HAMP request …
Servicer: notices, NPV calculation, correspondence, foreclosure notices
• Overlay individual time lines and identify data that does not match the E-bRM timing template Notices that recommend defaulting for HAMP participation
No record of NPV calculation
Reductions not in accordance with HAMP policy
Payments not recorded per HAMP modification
Parallel track foreclosure processing
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 3: HAMP Process Compliance
Solution Automation (continued):
• Provide report of all mortgage case files identified with potential irregularities
Case Identification
Time Lines
Log of Potential Errors
Mortgage Document Repository Data Folder (all collected documents)
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 4: Payment Allocations Accuracy
Problem Scope: Objective: Determine if servicer is accurately
allocating payments received for a loan Problem Set: Legacy portfolios and go forward
processing Concerns to Identify: payments applied to fees
before principal / interest, forced insurance, escrow allocation issues, all RESPA violations
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 4: Payment Allocations Accuracy
Solution Automation:• Use E-bRM Template to determine relevant data
points: Foundational documents (note, mortgage) Performance documents (payments, escrow, fee statements,
balances)• Identify Required / Relevant Data Sources
Servicer Platform (note, mortgage, payment, escrow, foreclosure docs)
Servicer Document Image System (correspondence, notices) Other (PACER for bankruptcy if required)
• Retrieve Data
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 4: Payment Allocations Accuracy
Solution Automation (continued):• Organize all data points on time lines:
Borrower: original purchase, payments, insurance, taxes…
Servicer: payment allocations, escrow, notice of default, RESPA …
• Overlay individual time lines and identify data that does not match the E-bRM timing template Late payments
Fee pyramiding (RESPA)
Notices of default / late payments
Forced insurance
Escrow allocation priority
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© 2013 E-bRM, LLC - CONFIDENTIAL
Use Case 4: Payment Allocations Accuracy
Solution Automation (continued):
• Provide report of all mortgage case files identified with potential irregularities
Case Identification
Time Lines
Log of Potential Errors
Mortgage Document Repository Data Folder (all collected documents)
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Quality Results Significant improvement in processing speed Accurate, repeatable, auditable Tools help identify and process exceptions Satisfy look back & look future CDMAAM & BMAAM mandates Compatible with multiple systems of record including:
MERS, PACER, DOD, NDC, DRI (and other SOR) Bankruptcy related errors – 19 unique templates vetted with the
U.S. Bankruptcy Court, that are the foundation of Operational Risk KRI’s library for RESPA & bankruptcy harm
MSR remediation More cost effective operations / single point of contact support Professional services / on-site implementation team
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About Us E-bRM – professional services, risk
management and project management, licensed software solutions for mortgage industry, Regulators & Institutional Investors
For more information or a live demo, contact:Richard Ellis
Principal
www.e-brm.com
914.643.6111
© 2013 E-bRM, LLC - CONFIDENTIAL
Appendix – Terms & Abbreviations• SOR – System of Record
• MERS – Mortgage Electronic Registration System
• PACER – Public Access to Court Electronic Records
• DOD – Department of Defense (in this case the service duty records)
• NDC – National Data Center
• DRI – Default software database
• SCRA – Service Members Civil Relief Act
• HAMP – Home Affordable Modification Program
• LTV – Loan to Value
• NOD – Notice of Default
• BPO – Broker Price Option
• SaaS – Software as a Service
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