Winter is here and even Christmas seems to be coming at us faster with the late November Thanksgiving this year. If you are anywhere near the mortgage industry, the next few weeks carry an even greater level of significance, because January 10, 2014 is looming on the horizon. That’s the official date when the newly minted Mortgage Servicing Rules under the Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) issued by the Bureau of Consumer Financial Protection (CFPB) go into effect.
Somebody told me long ago that a tree grows its branches in the spring and its roots in the winter. I have always liked that analogy, because whether it is true or not, it’s a metaphor I can relate to. As a mortgage professional dating back to the mid 90’s, I used this analogy with my team following the rate plunge of 1997-98 to help instill the idea that just because times seem lean and frigid, you can’t just go into a cave and sleep it off. Instead, you should dig-in and grow your roots in the areas of your business that aren’t as developed as others and as a result, you will be better equipped to grow taller when the thaw comes.
Without question, the last six years have presented the mortgage industry plenty of root growing time, but January 10th will mark a day of reckoning. Failing to make the grade with the new CFPB rules will bring consequences for some servicers. One of the main focuses of the new rules is on better borrower communication. In my opinion, this brings with it hidden opportunity to grow some significant roots for the industry in this critical time.
I don’t know of anyone who fundamentally opposes the notion of better communication, but actual communication requires more than one party sending a letter or email, or placing a call to another. Good communication requires participation from at least two parties. In recognition of the fact that it can be hard for a servicer to reach a borrower to communicate with them, especially when the topic is default related, the CFPB has cast a broad net of acceptance in Reg X by using the phrase “Good Faith Effort”.
The Good Faith Effort is a tip of the hat to the servicers, of course. If you don’t at least try to communicate with your borrowers, how can you ever hope to reach them? I’m firmly in the servicer’s camp on this one. Through all of the various issues that have arisen over the past few years in an attempt to explain what went wrong, I rarely see mention of the fact that a whole lot of Americans value their freedom. They value it so much, that many seem to think they should have a mortgage and a home, and not have to acknowledge they are engaged in a long-term, long-distance relationship as well. Couple this desire for freedom with a few not-so-business-friendly rules about calling or texting mobile phones, and you’ve got a major disconnect between what is needed for better communication, and what is possible. Herein lies an opportunity to leverage the work the CFPB is doing, and the influence they possess, to promote change in an area that impacts borrower communication greatly, but resides in a place where servicers are practically helpless to affect and improve it.
Nearly a third of Americans have completely unplugged from their landline phone service. That number grows every day. Americans have clearly embraced their freedom with the evolution of the now ubiquitous smartphone, and yet, laws such as the Telephone Consumer Protection Act (TCPA) are presenting a major stumbling block for mortgage servicers when it comes to actually being able to execute on better borrower communication. TCPA in its current state, not only places limits on telemarketing calls to mobile devices, but it throws the same sort of obstacles in the path of companies just trying to better communicate with their borrowers. The Good Faith Effort means the CFPB can provide expectations around what should happen, but hedges against the fact that in many cases, the servicers simply aren’t able to do better, by no fault of their own.
I’ve always told my clients there isn’t likely to be a silver bullet to fix the TCPA and how it hinders servicing communication efforts. But that was before the CFPB emerged with its newfound and impressive ability to mandate change. When you engage with the Bureau (and you will), I encourage you to point out the difficulty the TCPA presents to meeting their mandates on borrower communication. Ask them to weigh in with the FCC on the need to exempt all required borrower outreach from the TCPA. Perhaps this impending cold season of change will bring about the realization that growing new roots will reinforce the idea of better borrower communication in a way that allows it to truly grow upward when the thaw comes.