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- Hello, I'm Paul Robin. In this segment, we'd like to provide you with some practical tips to help you incorporate the Mortgage Servicing Rules into your Compliance Management System, or CMS. All supervised banks should develop and implement an effective CMS to ensure compliance with consumer protection regulations - including the Mortgage Servicing Rules. Your CMS should be appropriate to your bank's size, product offerings, and business strategies. As you know from other FDIC examination resources, the components of an effective CMS generally include Board and senior management oversight, policies and procedures, training, monitoring, response to consumer complaints, and, if appropriate, audits. Today, we will not discuss all of the components that should be part of your CMS, but will focus on some issues to keep in mind that specifically relate to the Mortgage Servicing Rules. Additional information about establishing and maintaining an effective Compliance Management System generally can be found on the FDIC's website. We will provide references to such resources at the end of this presentation. The requirements for maintaining Small Servicer status and for demonstrating compliance with the Mortgage Servicing Rules applicable to Small Servicers may also be a factor in your bank's business decisions. A good place to start a discussion on compliance-related considerations is to look at "OVERSIGHT" by your Board of Directors, Management, and others. In the case of the Mortgage Servicing Rules, it's critical for your bank's senior management and Board of Directors to have a basic understanding of the Rules. This is because they are the ones who will have to decide whether they want your bank to service mortgage loans at all - and, if so, whether they want to attain or maintain Small Servicer status. As you may recall, we discussed the ways to qualify for the exemption in Segment 2. Importantly, to have Small Servicer status, a bank must service, for a fee, only those mortgage loans that the bank itself, or the bank's affiliates, originated or own. In addition, the bank, together with its affiliates, may not service more than 5,000 of such loans in total. Your bank can also decide to maintain Small Servicer status by not charging a fee or receiving any compensation for all or some of the loans serviced, or by selling and not servicing loans in excess of the 5,000 loan cap. Another critical element to complying with the Servicing Rules, as with all other applicable laws and regulations, is for the Board or senior management to designate an individual to take ownership of compliance responsibilities in this area. In larger banks, there may be several people who provide oversight, but we understand that a small bank with limited staff may only have one person who has any expertise in the Mortgage Servicing Rules. It is important to make sure that there is at least one qualified person in charge of compliance, and another qualified person that can provide back-up assistance when needed. An important component of your bank's CMS is POLICIES AND PROCEDURES. Accordingly, it's essential that a Small Servicer have strong policies and procedures in place to ensure consistency in servicing practices and compliance with all applicable Rules, including maintaining continuity in the absence of key individuals. Generally, your policies and procedures should incorporate the provisions of the Servicing Rules that apply to Small Servicers to ensure that you, as a Small Servicer, are doing the following: 1) Promptly crediting payments and providing payoff statements; 2) Providing accurate and timely ARM disclosures; 3) Providing timely and accurate information in response to requests for information; 4) Investigating, responding to, and, as appropriate, making corrections in response to complaints or errors, and informing borrowers appropriately; 5) Providing owners or assignees of mortgage loans with accurate and current information and documents about all mortgage loans that they own; 6) Submitting documents or filings required for a foreclosure process, including documents or filings required by a court of competent jurisdiction, that reflect accurate and current information and that comply with applicable law; 7) Following the loss mitigation 120-day pause rule; 8) Following the new force-placed insurance rules; 9) Facilitating transfer of information during servicing transfers; and 10) Ensuring oversight of, and compliance by, third-party service providers, including sub-servicers. Practical tips on compliance with these provisions are included on the next slides. Next, let's discuss the "TRAINING" component of your compliance management system and how to incorporate relevant parts of the Mortgage Servicing Rules. Training all relevant personnel on applicable laws and regulations is a key aspect of any CMS. And your training approach should be appropriate to the size and scope of your bank's servicing activities, and should cover all relevant personnel. Examiners may check to determine that your bank has identified a person responsible for training, that appropriate personnel have been trained, and that there is a timeline for training all appropriate personnel. Effective training systems cover not only the applicable regulatory requirements, but also the bank's policies and procedures to ensure compliance with those requirements. The CFPB's website is an excellent resource for training materials, and the CFPB sometimes conducts webinars in conjunction with other agencies or trade groups. And, of course, the FDIC continues to produce technical assistance resources for our banks as well. With regard to the Servicing Rules specifically, training should focus on the level of knowledge needed by each person or group in order to understand and comply with the Rules. As we mentioned earlier, senior management and the Board should be familiar with the Rules and the basic requirements and potential consequences for non-compliance. Servicing staff should be fully trained on how to comply with all of the applicable Rules. Now, let's touch on "MONITORING." An effective monitoring program, tailored to the size and scope of your servicing activities, is an essential part of a CMS for Mortgage Servicing Rules compliance. For Small Servicers, monitoring can be conducted internally by someone in the bank not directly involved in the specific servicing process that is being tested. Through the monitoring that your bank conducts, or possibly through an audit of your servicing area, you should have a sense of the degree to which your bank is meeting the requirements of the Mortgage Servicing Rules. From those results, you should also be able to identify areas that need refinement. This will also give you an opportunity to determine early on whether a given issue is an isolated case, or if there's a systemic problem calling for broader action. The monitoring plan should include a schedule identifying the monitoring function, who will conduct the function, and how often it will be performed. For example, some banks have adopted checklists to be completed and verified for each loan file to document the level of adherence to policies and procedures. Additionally, some institutions produce automated weekly "tickler" alerts to servicing staff indicating time-sensitive benchmarks that are approaching and when they are met. The most effective monitoring programs also formally track issues that have been identified in order to prevent their recurrence. This may include providing targeted training, amending policies and procedures, or adjusting system parameters. Finally, due to the importance of the Mortgage Servicing Rules, and to the potential liability for non-compliance, the monitoring program should also include a system for documenting and reporting the findings to senior management. You should also identify issues that may arise in the future and be prepared to address them. This proactive approach will help save you time and effort when such issues do arise. For instance, circumstances may arise requiring the force-placement of hazard insurance. While community banks may not frequently face the need to force-place hazard insurance, they should ensure that policies and procedures are in place to address these situations should they arise. Procedures could be designed to timely identify force-placed insurance issues, maintain templates for use in communications with borrowers, accurately code transactions, and properly assess and refund insurance premiums. Similarly, you may also want to consider in advance how to identify and handle "accommodation" loans as they could trigger additional servicing requirements. For example, assume an established customer requests an ARM loan when you currently do not offer ARMs. Given your business relationship with the customer, you may decide to accommodate the request. That's a reasonable approach and a normal part of a community bank's relationship with its customers. However, it's important to be sure that in making that loan, you comply with all applicable rules that apply to it - everything from initial disclosures to ARM rate change notices must be provided in an accurate and timely manner. Compliance staff should be involved in ensuring that the bank is able to identify and fulfill all applicable requirements when making any type of loan and to periodically remind management and loan officers who may make such one-off accommodations. Identifying covered transactions can also be more complicated when a home-secured loan is originated through departments other than home mortgage lending units, such as the commercial or agricultural lending areas. In such cases, it's important to be sure that loans are properly coded in the servicing system to ensure that the servicing requirements are satisfied. It is important that staff understand the ramifications of system parameters and coding to ensure that benefits of the system are fully utilized, and that bank policies and procedures are observed. Remember, too, that the CFPB stated, in its preamble to the Mortgage Servicing Rules, that it wanted to make clear that the Mortgage Servicing Rules set forth minimum requirements for compliance. Thus, the Mortgage Servicing Rules do not prevent other entities, including owners and assignees of mortgage loans, from setting higher or additional servicing standards. That means that your bank may need to comply with servicing requirements that exceed (but are not in conflict with) the requirements set forth in the Mortgage Servicing Rules. Now I'll turn it back over to Jonathan Miller, our Deputy Director for Policy and Research, to wrap up today's presentation. - Thank you, Paul. These practical suggestions bring us nearly to the end of our presentation. Let's conclude with a brief recap, and then identify some resources you might find helpful to consult. In Segment 1, we gave you an introduction to this video and set forth the content that the segments of this video would cover. In Segment 2, we discussed the Small Servicer Exemption, focusing on understanding who is covered by the exemption - including how to accurately determine whether you qualify for the exemption. In Segment 3, we walked through the Mortgage Servicing Rules that apply to Small Servicers and briefly touched on the other Mortgage Servicing Rules. In Segment 4, we responded to some questions we've been hearing from our banks about the Servicing Rules, to provide you with clarifying information. Finally, in this segment, Segment 5, we discussed practical tips and best practices for integrating the Mortgage Servicing Rules into your bank's CMS. As we promised earlier, on the following slides you will find some resources you may wish to consult to assist you in understanding and complying with the Mortgage Servicing Rules. This includes the CFPB Small Entity Compliance Guide that discusses the Rules in detail, and the CFPB Quick Reference Chart that you may find particularly useful. It also includes a link to the proposed rule the CFPB issued on November 20, 2014, that would make certain targeted adjustments to the Servicing Rules. As noted, until such proposed rules are finalized and effective, servicers must follow the current Rules as presented today. And, as we indicated at the beginning of the presentation, if you are a large servicer, you should also check the resources available on the CFPB website. You also might find it useful to look at the Interagency Examination Procedures and Narrative for Truth in Lending - Regulation Z, and for the Real Estate Settlement Procedures Act - Regulation X. These are available in the FDIC Compliance Manual and on the CFPB website. Again, today's presentation is meant to give you an overview of the Servicing Rules as they relate to Small Servicers, and to discuss some key issues that may be of interest to your bank. You should always refer to the Rules themselves if you have specific questions. If you are an FDIC-supervised institution, you should also always feel free to reach out to your examiners or to staff in your FDIC Regional office with any questions. We appreciate your interest, and hope you found the information in today's presentation useful. Thank you.