Unnecessary Disclosures: Servicing/Rescission - CFPB Death Penalty
A couple of forms you might not need anymore. Plus a note on one mortgage lender's death penalty from a CFPB enforcement action.
Here at SCA we've been fighting a war to help shrink, update, and simplify loan files. This is a war where battles are fought one page, sometimes one sentence, at a time. Bloated loan files decrease borrower satisfaction and increase uncertainty (sometimes confusing ourselves). The good news here is that there is always PLENTY of things that can be cut out of a standard loan file package -- and imagine the time savings with even removing one form. One less form to have signed. One less form to chase down (when it's not signed). One less form that needs to be scanned. One less form that needs to be discussed with an auditor. And on and on.
So what's on the chopping block for today?
Servicing Disclosure Statement
This is a disclosure that advises the borrower, among other things, that the lender may assign, sell, or transfer servicing after closing. Here's a picture of a standard format for one.
If you still include this in your loan files, you can get rid of it. Unless the loan is exempt from TRID and you're not using the Loan Estimate/Closing Disclosure, the TRID disclosures replaced the Servicing Disclosure Statement and this has long since been unnecessary to include.
But Distinguish: The "Notice of Servicing Rights" disclosure has not been replaced and still needs to be provided to the borrower 15 days before transfer or at closing (so most lenders choose closing). Where the Servicing Disclosure Statement (should be removed) tells the borrower servicing might be transferred, this Notice of Servicing Rights tells the borrower that servicing actually has been transferred. So don't get rid of this one!
The Notice of Servicing Rights is required by RESPA 1024.33(b). The Servicing Disclosure Statement was required by 1024.33(a), but if you read it now, you'll see it's no longer in the rule.
Extra Rescission Notice with E-Disclosure
Every consumer always needs an extra rescission notice--meaning we give each consumer two copies of the same disclosure--right? Actually, no. Where you provide the rescission notice electronically (in compliance with E-Sign), you only need to give one copy to each consumer. For reference read the rule at 1026.34(b)(1).
Note: Even when sent electronically, each individual consumer still must receive a separate copy. But since it's electronic, they only need to receive one each, not two.
In Other News
Love the thought of affordable housing opportunities that might stem from the ability to use a 3-D printer to build a (pretty nice) house in 24 hours for $10,000. Check it out and let your imagination run wild.
Santander receives negative rating ("Needs to Improve") from OCC, read the story here ... many problems related to its "poor oversight of its vendors" and the OCC also found its CRA investments of $905,000 over two years "stingy", as compared to Eastern Bank's $7,000,000. While the regulators won't fine Santander for these CRA problems, they might wish they would, since this rating will limit Santander's ability to build new branches, purchase other institutions, and more.
Speaking of regulatory sanctions - did anyone else notice that the CFPB's action against Prospect Mortgage included a "death penalty" sanction (see #97), forcing them to give up their licenses? Appreciate a friend forwarding that along - surprised it's not getting more attention.
On My Mind ...
Can one good habit lead to others? Some people think so. In his book, The Power of Habits, Charles Duhigg recants the story of a new CEO at Aluminum Company of American (Alcoa), who started back in 1987. As the story goes, this CEO brought about record-breaking improvements at Alcoa--all-time high profits in 1988, and market capitalization increase by $27 billion by the time he retired in 2000--by attacking one bad company habit and letting that culture change permeate through the rest of the company.
At his introduction in 1987, the crowd of investors expected to hear the new CEO talk about profit and loss and other bottom-line topics. Instead, he spent the entire press conference discussing his plans to improve employee safety. Confused, an audience member asked about inventory, another about capital ratios. The CEO responded: "I'm not certain you heard me. If you want to understand how Alcoa is doing, you need to look at our own workplace safety features." He even paused to inform everyone where the safety exits were and to provide instructions in the case of an emergency.
Asked about it years later, the CEO reported "I knew I had to transform Alcoa. But you can't order people to change. That's not how the brain works. So I decided I was going to start by focusing on one thing. If I could start disrupting the habits around one thing, it would spread throughout the entire company."
In other words, as the book explains, the CEO "believed that some habits have the power to start a chain reaction, changing other habits as they move through an organization."
"If somebody had said to me in June or July of 1987, 'We'd like you to become chairman of the Federal Reserve, but you're never allowed to discuss any economics after you leave,' I'd have said, 'Forget it.' What do they want me to do? Become an anthropologist?'"
- Alan Greenspan
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