Servicing Issues Go Well Beyond Payment Processing

NHEMA conference speakers cover foreclosures, Web sites

June 29, 2004

By NEIL J. MORSE

“They are not a kidding matter,” she said, speaking slowly and then taking a deep breath. “We know of three suicides in our town because of foreclosures on loans that never should have been made or sold,” Keest said, a demonstrable sadness in her voice.

As assistant attorney general, deputy administrator, Iowa Consumer Credit Code, Des Moines, Keest has seen firsthand the troubles people experience when they fall behind in their mortgage payments. She told those stories at the invitation of the National Home Equity Mortgage Association, which held a compliance and servicing conference in June in Chicago.

“People’s lives are really tied into [mortgages],” Keest told listeners, urging them to “keep that in mind when you’re servicing these loans.” Foreclosure, she said, is the “wrong incentive for everyone.”

Following Keest’s comments, it was the servicers’ turn to lament.

John LaRose, chief executive officer, Celink, Lansing, Mich., a loan servicing company that specializes in subordinated lien loans, said he “longs” for the day “when servicers weren’t getting any press,” recalling that loan servicing used to be a little-noticed segment of the mortgage business.

Now, it has come front and center as a result of recent litigation brought by agencies like the Federal Trade Commission. As a result, LaRose complained, servicers “literally have to walk through a minefield. There is blood in the water in today’s environment — [government] agencies are on the prowl.”

Celink’s Bruce Carlson, chief operating officer, emphasizes the importance of staff training. “The people who work on loss mitigation for your firm should be seasoned and educated on the products [they cover]. They need to have a clear understanding of all the [servicing] options,” he says.

Conference-goers also heard from Julia Leah Greenfield, associate general counsel, Finance America, Irvine, Calif., discussing violations by lenders and brokers who let their licenses be used by those not allowed to do business in a state.

It’s happening a lot and in violation of RESPA, according to Greenfield. She said the FTC is now looking at mortgage company Web sites, in search of “misleading and hard to understand information and ‘triggering’ terms that require additional disclosures,” which must be conspicuous. “Have your attorneys review your web advertising,” counsels Greenfield. She says there had been no enforcement of this in the past, but that is now changing.

Fellow attorney Elena Lovoy, partner, Hudson Cook, Barrington, Ill., said there is heightened concern about identity theft — such a prevalent crime. The financial institution has to properly dispose of consumer information derived from consumer reports. A consumer is defined broadly as including even those individuals who applied for, but did not get, loans.

Neil J. Morse is a communications consultant and independent writer working exclusively in the mortgage finance industry. He resides in Newtown, Conn. and may be reached by e-mail at: morse@ntplx.net