mortgage servicing - south carolina association of habitat...
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Mortgage ServicingDate:
Done?Required / Best Practice
Post ClosingThis section is performed by affiliate even if 3rd party serviced
Required
File ReviewRESPATILA
RequiredRecording
RequiredDisbursement
Required if applicable
CommunicationE-Sign Act
RequiredTracking
Required
Compliance
RequiredPaperworkGLBA
Items to Consider
Has Partner Family authorized electronic communication? If so, ensure to have acknowledged disclosure in file. Further, should also have evidence that partner family can access information via the electronic form that will be used to provide information.
Is the file complete and in order?-‐ Evidence of initial and closing disclosures included?-‐ Verify HUD-1 to all doc; ensure amounts are correct between the GFE and HUD 1-‐ Note and deed of trust/mortgage match names, dates, loan amounts etc.-‐ Does the promissory note correctly account for loan term and amount, payment date, maturity date, where payments are to be made, and correct monthly principal and escrow requirements-‐ Documents are signed by all parties and notarized accordingly
Has the mortgage/deed of trust been sent for recording in the correct jurisdiction?
Was disbursement of funds in line with the HUD-1If grant funds (DPA) are not noted on the HID-1, the settlement statement will have to be updated and loan reclosed.
Are there missing /outstanding documents, if so, follow-up and diarize
Was it provided at closing, or does it still need to be sent to Partner Family?
Timeline - if the initial escrow statement is not provided at closing, it must be provided within 45 days to the Partner Family
Required
RequiredInitial Escrow Statement
RESPA
Is the file in compliance with regulations, grant requirements and affiliate policies? From outreach and marketing to closing.(e.g. TILA, RESPA, FCRA, Fair Lending Laws, etc.)
Where is the day-to-day paper file stored, is it secured? Ensure that only authorized personnel have access.Evidence of Right of Rescission - ensure funding was not disbursed until the rescission period expired.
Timeline -‐ Partner Family(s) have until midnight of the 3rd business day from the last of three events: the consummation of the loan; delivery of all material disclosures; or deliver to the Partner Family of the required rescission notice to rescind. Rescission must be in writing. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first.
Repair Loan secured by lien principal residence
TILA
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Required
Follow-up
Done?Required / Best Practice
Loan Boarding
In-House Servicing
Escrow AccountRESPA
Payment methodEFTA
Best Practice
Periodic StatementsTILA
Items to Consider
timeline - Affiliates have to provide Notice of Transfer to the Partner Family not less than 15 days before the effective date of the transfer of the servicing. The receiving servicer also has to send a notice to Partner Family - It is lawful to combine both notices in 1 to the Partner Family.
Third-Party Servicing
-Upon receipt of the recorded note & deed of trust/mortgage and any other recorded items (e.g. shared appreciation instrument); ensure the original note and deed of trust / mortgage are stored offsite in a secured location?-are all pending items received? If not, follow-up until they are received.
Is servicing completed by a third-party, if so transfer file as per servicers instructions.Ensure that a Notice of Transfer of Servicing Rights (Good-bye letter) was provided to Partner Family and indicated that loan servicing will be transferred and the effective date.
Board the loan on the servicing system as per affiliate policy and procedure
- Are there any adjustments that are required with your financial institution when a new loan is boarded?- Is the account accurately established in accounting system?
Will the Partner Family pay by ACH, if so, is all the information required present? - Is proper authorization on file - (the authorization may reside with your financial institution)- Was a EFTA disclosure provided to Partner Family?
- Although not required for small servicers - it is standard practice in the industry to provide Partner Family a monthly statement containing the following: amount due, due date; and late fee and when that fee will be imposed- A coupon book with the same information is also suitable
Required when
applicable
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Done?Required / Best Practice
Payment Processing
Required
Late FeeRESPA
Required
Partial PaymentRESPA
Required
Escrow paymentRESPA
Required
AML
Best Practice
Hand-off
Required
-Was a late fee assessed? Ensure no pyramiding of late fees?When an amount is received and it is not considered a full payment because of owed late fees or delinquency charges for an earlier payment(s), as long as the amount covers the principal and escrow, the payment is considered a full payment.
Follow affiliate approved policy for handling *reminder - if only a partial payment is received within the billing cycle, the Partner Family is delinquent, and should be categorized as such. Ensure to send delinquency notices as required.- It is good practice to provide an account statement to the Partner Family with information of how the partial payment is treated - held in a suspense account (strongly recommended), put towards escrow, or principal. Ensure affiliate's book keeping and accounting records are updated accordingly.
Timeline - accepted non-conforming payments must be credited to homeowner's account within 5 days of receipt.
Is the balance in the account sufficient to disburse if required (at the target balance based on the annual escrow analysis)? Should a significant shortage occur in the escrow account of the Partner Family, then affiliate should consider if the computation year is in sync with the tax or insurance increase cycle. If it is not, a short year statement can be done to change the computation year and allows for an increase in the monthly escrow payment amount. *Always follow payment disbursement as outlined in the mortgage documents - do not put all funds to escrow unless authorized. Refer to a local attorney.
- Is there sufficient information to apply the payment to the correct account (coupon, account number etc.)-Is the amount a full periodic payment (sufficient to cover principal and escrow)? Ensure that payment is applied according to state law, mortgage documents and or affiliate policy.-Is it posted to Partner Family's account as of the date received? -Is the payment non-conforming? If so will the payment be accepted?
Items to Consider
Payments ReceivedTILA
RESPA
- Is the payment received typical for the Partner Family? If not, ensure to escalate to the Compliance Officer for further instructions.- Does the affiliate AML policy/procedures address examples of an unusual transaction?
Prepare daily recap of payments to applicable personnel for banking and or accounting entries
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Done?Required / Best Practice
Delinquent Accounts
Required
Policy
Best Practice
Engage Attorney
Required
Bankruptcy
Required
Treatment of CustomersECOA
Required
NoticesRESPATILASCRA
Best Practice
ReportingGLBA
Best Practice
Forbearance Agreement
Best Practice
Options
-Are policies being followed consistently to prevent disparate treatment to Partner Family?-Are notes of conversations and outcome with Partner Family maintained for reference and future use?-‐Has a notice to Partner Family been sent to advise of the missed payment and potential consequences? 30-‐60-‐90 days notices (best practice) also use a Single Point Of Contact (SPOC), when possible-‐ has live contact been made to the Partner Family?-‐ If the Partner Family is 45 days or more delinquent, has a notice with the HUD counseling information been sent prior to the 45th day? -‐ Is your Partner Family a servicemember? If so, has a Servicemembers Civil Relief Act (SCRA) delinquency notice been sent before the 45th day of delinquency?
Is the monthly mortgage receivable report updated to capture any new delinquent accounts - ensure to provide most recent report to board. To maintain confidentiality, ensure that board report and minutes do not include personal information of the Partner Family (use account numbers for identifiers).
Is the Partner Family behind on payments just a temporary situation? If so, this type of agreement could be considered
Is there an affiliate board-approved policy in place that outlines the process for handling past due accounts?Is the policy comprehensive and encompasses all aspects of loss mitigation and is consistently followed?
- Is the Partner Family in bankruptcy protection? Generally, communication must be stopped with Partner Family - engage a attorney with bankruptcy experience to guide affiliate thru process
Items to Consider
- A demand notice from an attorney will usually get the attention of the Partner Family that the delinquency is a serious matter and needs to be rectified- Has the attorney reviewed the affiliate policies and procedures to ensure that federal and state laws / regulations that affect collection and foreclosure practices are accurate?
What options are available to the affiliate in your state / county - have they been explored with homeowner? (e.g. Hardest Hit Fund)
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Required
Loss MitigationRESPAECOA
Required when
applicable
Debt Cancellation ECOA
Required
ForeclosureECOARESPA
Debt Cancellation is not a recommended practice.- Ensure that the servicing policy covers these types of activities; and should include who has the authority to offer this option to homeowners.- Always engage a real estate attorney - Policy must be applied consistently to prevent unfair treatment to homeowners- Ensure to have complete documentation of circumstance that led to decision to cancel debtA 1099-C is not required for debt cancellation as long as the family remains part of a charitable class of persons (e.g. low income). The affiliate is providing a charitable benefit to member of the charitable class. However, if the partner family (for example) won the lottery or otherwise received a large windfall of money, then forgiveness of its debt would not be a charitable gift for a “charitable class of persons” and that debt forgiveness would be taxable.
- Is the Partner Family 120 days or more past due (state law may have different timing requirement)? If so, it is acceptable to file for foreclosure - contact an attorney with foreclosure experience to guide you- Is there a board-approved policy in place that outlines managing the process? Policy should contain adequate controls for operational compliance, legal and reputation risk associated with foreclosure activities. Further, controls should be in place to ensure consistent application of policy to all homeowners.- Ensure that full disclosure is made to the Partner Family of deficiency payments and other costs that will be recouped from them- What is the oversight in place for foreclosures?- What reporting is provided to the Board for oversight? - Have the documents that support foreclosure proceedings been properly endorsed/assigned?
- Are there loss mitigation options available for homeowner? Have you provided those options to the Partner Family?- Assessment of loss mitigation application must be managed to ensure that notification of complete and incompleteness to Partner Family is made within 5-days of receipt- Cannot "dual track"; foreclosure filing cannot be made while Partner Family is adhering to trial modification or forbearance agreement terms, or while the Partner Family is being evaluated for a loss mitigation option even if the borrower is more than 120 days delinquent. State law may require a longer timeframe, so ensure to know your state laws- Loss Met options should be made available to all Partner Families to ensure compliance with ECOA- For all Loss Mit applications, Partner Family must be evaluated for Ability-To-Pay. Title should be reviewed again to determine if additional liens have been place on the property- Any Loss mit applications that are denied, an adverse action notice must be sent to Partner Family
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Non-Retention Options - Does the servicing policy address options like short sales, deed in-lieu / cash for keys?- Ensure that local Real Estate attorney is engaged for these transactions and provide formal documents- Ensure to review for any applicable restrictive covenants, affordability period, and potential repayment requirements from DPAs when taking this option.- Ensure that full disclosure is made to the Partner Family of deficiency payments and other costs that will be recouped from them
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Done?Required / Best Practice
Deceased HomeownerItems to Consider
Policy
Evidence
Notification of Death
Assumption by Successors-in-InterestTILA
Done?Required / Best Practice
Escrow MgmtRESPAPlanning
Preparation
Disbursement Date
Items to Consider
Do mortgage documents outline escrow provisions, if so, ensure to follow when applying cushion? State law may also govern escrow requirements - engage a local attorney
- Ensure to evaluate the standing of the mortgage; can the successor in interest continue to make payment on the mortgage etc.?- Should mortgage assumption be an option, provide successor in interest with information of assuming the loan
- Has the successor in interest provided evidence of death of the Partner Family, as well as, their identity and legal interest
Required
REQUIRED
- disbursement date is the date on which the escrow payment is made from the escrow account to the payee (e.g. taxing authority)- Is the payment for tax and insurance made on or before the deadline to avoid penalty, as long as the Partner Family is not more than 30 days past due ?- Any late fees charges from payee belong to the affiliate not the Partner Family, as long as the Partner Family is not more than 30 days past due- Are the funds advanced even when the escrow account is deficient? In cases when this occurs, the servicer can seek repayment from the Partner Family for the funds advanced, unless prohibited by local/state law.
- Does the servicing policy cover deceased homeowners? Ensure applicable federal and state laws are incorporated.- Policies should ensure that, upon notification of the death of a Partner Family mortgagor, the affiliate promptly identifies and facilitates communication with a successor in interest of the deceased with respect to the property that secures the mortgage loan.- Ensure that the provisions of the Garn-St. Germain Act which imposes limits on due-on-sale clauses as a result of death of a Partner Family are followed.
-‐Is the Partner Family current with their payments -‐ -‐has there been an increase in the rate for property taxes and or hazard insurance for the Partner Family?-‐ does the monthly amount collected meet federal requirements of a cushion no greater than one-‐sixth (1/6) of the estimated total annual payments; or at minimum, one-‐twelfth (1/12) of the total annual payments which the servicer reasonably anticipates paying from the account?
Has a successor-in-interest agreed to be added as an obligor or subsituted for the existing obligor on the mortgage? - If so ensure that the mortgage is
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Annual Account Analysis
- Force Placed insurance is used when the insurance of the Partner Family lapses/was not renewed. Affiliate should ensure that hazard insurance is always on the property to protect their collateral.- Small servicers are permitted to purchase force-placed insurance and charge the Partner Family for the cost of that insurance if the cost to the Partner Family is less than the amount the small servicer would need to disburse from the Partner Family’s escrow account to ensure timely payment of the Partner Family’s hazard insurance premium charges.- Ensure disclosures for force-placed insurance is delivered to homeowner
- Has an escrow analysis been completed for the Partner Family in the past 12 months to determine the Partner Family's monthly escrow payments for the next year?- Does the account have a surplus, shortage, or deficiency? Each may require a different treatment based on amount, currency of account, and or state laws. - Has the Partner Family been provided with an annual statement within 30 calendar days of the end of the computation year. The statement must containing the account history; projections for the next year; current mortgage payment and the portion going to escrow; amount of past year’s monthly mortgage payment and portion that went into the escrow account; total amount paid into the escrow account during the past year; amount paid from the account for taxes, insurance premiums, and other charges; balance at the end of the period; explanation of how the surplus, shortage, or deficiency is being handled; and, if applicable, the reasons why the estimated low monthly balance was not reached. - Ensure to review mortgage documents to determine if a cushion limit has been defined, and if so, the limit must be honored. If the limit is set higher than federal law requirement (no more than 1/6 of the estimated total annual disbursements from the escrow account), then the RESPA federal limit must be adhered to unless, state law provides for a lower amount.
REQUIRED
Force-placed InsuranceTimeline - first disclosure notice to Partner Family is at least 45-days before charging for force-placed insurance; should you not receive evidence from the homeowner of hazard insurance coverage, provide another written reminder at least 30-days after the first notice. Still if no evidence of insurance coverage is provided, you may force-placed insurance 15-days after sending second notice.Should Partner Family provide evidence of insurance after force-placed insurance is in place, servicer has 15 days to cancel and refund the Partner Family for any periods of overlapping coverage.
Is there a process in place to ensure that properties in flood zones are adequately insured for the life of the loan?Ensure that properties in a flood zone have adequate flood insurance to protect the asset. Forced Place insurance is requried if the the property is under insured or insurance has lasped (proper notice must be provided to homeowner before purchasing forced place insurance)
timeline - if the homeowner has not purchased adequate flood insurance then, by the 45th day of sending the notice of required insurance, the servicer must purchase forced place insurance.
Flood InsuranceFDPA
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Done?Required / Best Practice
Request for Payoff TILA
Timing
Oral or Written Payoff Requests
Shared Appreciation
Deed Restriction
Final Loan Payment(end of term)
Done?Required / Best Practice
Error Resolution & Information RequestsRESPA
Acknowledgement
Investigation
Resolution Response
Complaints
Items to Consider
Items to Consider
Ensure that calculation to pay off is based on terms in the instrument; Generally, when shared appreciation is used, the timeline for responding by the 7th business day may not be achieved. This is acceptable within the law, but ensure that the payoff statement is provided within a reasonable time. (shared appreciation instruments should be separately recorded)
Is there a process to establish / document when the request was received so the payoff statement can be sent by the 7th business day to Partner Family?
In cases where deed restrictions are in place, ensure to communicate to Partner Family
Has the information /error been investigated, if so, in the case of an error, was a correction required?
-Are there any subordinate liens on the property including subsidy providers?-Are there any fees outstanding?Ensure the amounts above are included in the total outstanding balance that will payoff the obligation in full.
- When a written request is received from a Partner Family, is there a process to establish / document when the request was received so the acknowledgement can be sent to Partner Family by the 5th day?
Is there an established policy and procedures for releasing the lien and cancelling the promissory note? - Has a Release of Deed of Trust / Satisfaction of Mortgage (may have a different name locally) been submitted to the county recorder's office to release any lien(s) (as applicable)? This releases the affiliate's interest in the property as collateral- The promissory note should be cancelled and provided to the homeowner as proof that the loan is paid off- Escrow Accounts must be closed out, and a short year statement completed (provided to the homeowner) and any surplus refunded to the homeowner within 60 days of payoff.
- Is there a process established to manage complaints? - Is there a reporting and or recording mechanism in place to capture complaints and resolutions?- Is resolution to borrow appropriate and approved by the correct authority in the affiliate?
Required
Required
Has a written notification of the error, correction or details of the requested information been provided within 30-days or no later than 45-days to the Partner Family?
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AA BB CC DD EE FFInformation Requests
Done?Required / Best Practice
Record RetentionRESPA
Policy
Servicing File
Information Request for servicing filePrivacy
Items to Consider
- Follow timeline listed above for Acknowledgement and Resolution- Affiliate is not required to provide information that is not in your control or possession, or cannot retrieve in the ordinary course of business- Affiliate is not required to provide documents relied upon that constitute confidential, proprietary, or privileged information
-‐ Does the servicing policy address record retention? -For each mortgage account, does the file electronic or hard copy contain all documents related to actions taken with the loan. Such as credits / debits to the account, including escrow and any suspense account entries; copy of the security instrument ; any notes created by servicer reflecting communications with the Partner Family; copies of information / documents provided by the Partner Family to the servicer for error resolution and or loss mitigation?
- Refer to Information Request section
- Are there standards in place to ensure customer information is adequately secured to prevent confidential information from being compromised?
Required
Required
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Done?Required / Best Practice
Credit ReportingFCRA
Required
Policy
Best Practice
Reporting
Required if applicable
Accuracy
Required if applicable
Disputes
Done?Required / Best Practice
Annual Requirements
RequiredEscrow StatementRESPA
RequiredPrivacy NoticeGLBA
Best Practice
Policy Review
Items to Consider
Reminders
Does your loan servicing policy cover reporting to the credit reporting agencies (CRAs) - Equifax, Experian, TransUnion (there are others, but these are the big 3 nationwide providers); and how to manage notification from a CRA that information that affiliate furnished is being blocked because of identify theft?
It is good practice to set a frequency to review all policies/procedures and update based on changes with laws, regulations, increased controls, and other circumstance that may have resulted in a change to lending practices.
All customers (Partner Family) must receive a notice every 12 months
- A small servicer typically cannot report directly to a CRA because there is a minimum number of accounts required, and generally most affiliates don't meet the minimum accounts.- Who is the service provider that transmits your account information to CRAs? - Ensure to have a contract with the service provider - discuss who will manage disputes, what data integrity checks will be in place to ensure that accounts contain no errors prior to upload etc.- Affiliate that use Keystone servicing software, transmission is done thru KeyCredit (a companion product). KeyCredit coverts the data in a format that is acceptable to transmits to CRAs. Keystone only transmits to Equifax.
- All information reported must be accurate and current (ensure that delinquency is characterized accurately before reporting)
Partner Family can dispute errors through a CRA or the affiliate regarding information that affiliate furnished to CRAs.- Ensure that a thorough investigation is conducted and results provided to the CRA or Partner Family within 30 days- Affiliate is only required to investigate disputes that involve information that they have furnished; such as fraud alerts, judgments and other public records
Each Partner Family must receive an Annual Escrow Account Disclosure statement at minimum every 12 months- refer to Escrow Management section
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Required
Vendor ReviewDodd Frank Act
RequiredUSA PATRIOT Act
RequiredLife of Loan Monitoring(FDPA)
Should your affiliate use service providers, it is required that there is an effective process of managing the risks of the relationship.- How thorough is the level of due diligence conducted on the provider, what is the frequency of the due diligence?- Has the service provider delivered on the contract - has the service been satisfactory, has there been any complaints from Partner Families or affiliate members related to the service provider?- What laws must the service provider comply with, and how do you ensure that compliance is being met? - Is there sufficient internal controls within the affiliate for monitoring of the providers practices?
Ensure that all names in portfolio are ran against the OFAC database at the frequency established in the AML policy. At minimum, low risk affiliates should perform this check at lead semi-annually.Ensure all loans closed in a flood zone is still adequately insured.
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SF to research
US Policy 22 -‐ Mortgage Closing & Servicing
Items to Consider
Has Partner Family authorized electronic communication? If so, ensure to have acknowledged disclosure in file. Further, should also have evidence that partner family can access information via the electronic form that will be used to provide information.
Is the file complete and in order?-‐ Evidence of initial and closing disclosures included?-‐ Verify HUD-1 to all doc; ensure amounts are correct between the GFE and HUD 1-‐ Note and deed of trust/mortgage match names, dates, loan amounts etc.-‐ Does the promissory note correctly account for loan term and amount, payment date, maturity date, where payments are to be made, and correct monthly principal and escrow requirements-‐ Documents are signed by all parties and notarized accordingly
Has the mortgage/deed of trust been sent for recording in the correct jurisdiction?
Was disbursement of funds in line with the HUD-1If grant funds (DPA) are not noted on the HID-1, the settlement statement will have to be updated and loan reclosed.
Are there missing /outstanding documents, if so, follow-up and diarize
Was it provided at closing, or does it still need to be sent to Partner Family?
Timeline - if the initial escrow statement is not provided at closing, it must be provided within 45 days to the Partner Family
Is the file in compliance with regulations, grant requirements and affiliate policies? From outreach and marketing to closing.(e.g. TILA, RESPA, FCRA, Fair Lending Laws, etc.)
Where is the day-to-day paper file stored, is it secured? Ensure that only authorized personnel have access.Evidence of Right of Rescission - ensure funding was not disbursed until the rescission period expired.
Timeline -‐ Partner Family(s) have until midnight of the 3rd business day from the last of three events: the consummation of the loan; delivery of all material disclosures; or deliver to the Partner Family of the required rescission notice to rescind. Rescission must be in writing. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first.
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Periodic Statements & Coupon Books Guidance
Items to Consider
timeline - Affiliates have to provide Notice of Transfer to the Partner Family not less than 15 days before the effective date of the transfer of the servicing. The receiving servicer also has to send a notice to Partner Family - It is lawful to combine both notices in 1 to the Partner Family.
The Notice of Transfer should contain the following: 1. Effective date of the transfer of servicing.2. The name, consumer inquiry addresses (including, at the option of the servicer, a separate address where qualified written requests must be sent), and a toll-free or collect-call telephone number for an employee or department of the transferee servicer.3. A toll-free or collect-call
-Upon receipt of the recorded note & deed of trust/mortgage and any other recorded items (e.g. shared appreciation instrument); ensure the original note and deed of trust / mortgage are stored offsite in a secured location?-are all pending items received? If not, follow-up until they are received.
Is servicing completed by a third-party, if so transfer file as per servicers instructions.Ensure that a Notice of Transfer of Servicing Rights (Good-bye letter) was provided to Partner Family and indicated that loan servicing will be transferred and the effective date.
Board the loan on the servicing system as per affiliate policy and procedure
- Are there any adjustments that are required with your financial institution when a new loan is boarded?- Is the account accurately established in accounting system?
Will the Partner Family pay by ACH, if so, is all the information required present? - Is proper authorization on file - (the authorization may reside with your financial institution)- Was a EFTA disclosure provided to Partner Family?
- Although not required for small servicers - it is standard practice in the industry to provide Partner Family a monthly statement containing the following: amount due, due date; and late fee and when that fee will be imposed- A coupon book with the same information is also suitable
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Link affiliate AML policy
-Was a late fee assessed? Ensure no pyramiding of late fees?When an amount is received and it is not considered a full payment because of owed late fees or delinquency charges for an earlier payment(s), as long as the amount covers the principal and escrow, the payment is considered a full payment.
Follow affiliate approved policy for handling *reminder - if only a partial payment is received within the billing cycle, the Partner Family is delinquent, and should be categorized as such. Ensure to send delinquency notices as required.- It is good practice to provide an account statement to the Partner Family with information of how the partial payment is treated - held in a suspense account (strongly recommended), put towards escrow, or principal. Ensure affiliate's book keeping and accounting records are updated accordingly.
Timeline - accepted non-conforming payments must be credited to homeowner's account within 5 days of receipt.
Is the balance in the account sufficient to disburse if required (at the target balance based on the annual escrow analysis)? Should a significant shortage occur in the escrow account of the Partner Family, then affiliate should consider if the computation year is in sync with the tax or insurance increase cycle. If it is not, a short year statement can be done to change the computation year and allows for an increase in the monthly escrow payment amount. *Always follow payment disbursement as outlined in the mortgage documents - do not put all funds to escrow unless authorized. Refer to a local attorney.
- Is there sufficient information to apply the payment to the correct account (coupon, account number etc.)-Is the amount a full periodic payment (sufficient to cover principal and escrow)? Ensure that payment is applied according to state law, mortgage documents and or affiliate policy.-Is it posted to Partner Family's account as of the date received? -Is the payment non-conforming? If so will the payment be accepted?
Items to Consider
- Is the payment received typical for the Partner Family? If not, ensure to escalate to the Compliance Officer for further instructions.- Does the affiliate AML policy/procedures address examples of an unusual transaction?
Prepare daily recap of payments to applicable personnel for banking and or accounting entries
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Sample Delinquency & Foreclosure Policy and Procedure
DOD SCRA Info
-Are policies being followed consistently to prevent disparate treatment to Partner Family?-Are notes of conversations and outcome with Partner Family maintained for reference and future use?-‐Has a notice to Partner Family been sent to advise of the missed payment and potential consequences? 30-‐60-‐90 days notices (best practice) also use a Single Point Of Contact (SPOC), when possible-‐ has live contact been made to the Partner Family?-‐ If the Partner Family is 45 days or more delinquent, has a notice with the HUD counseling information been sent prior to the 45th day? -‐ Is your Partner Family a servicemember? If so, has a Servicemembers Civil Relief Act (SCRA) delinquency notice been sent before the 45th day of delinquency?
Is the monthly mortgage receivable report updated to capture any new delinquent accounts - ensure to provide most recent report to board. To maintain confidentiality, ensure that board report and minutes do not include personal information of the Partner Family (use account numbers for identifiers).
Is the Partner Family behind on payments just a temporary situation? If so, this type of agreement could be considered
Is there an affiliate board-approved policy in place that outlines the process for handling past due accounts?Is the policy comprehensive and encompasses all aspects of loss mitigation and is consistently followed?
- Is the Partner Family in bankruptcy protection? Generally, communication must be stopped with Partner Family - engage a attorney with bankruptcy experience to guide affiliate thru process
Items to Consider
- A demand notice from an attorney will usually get the attention of the Partner Family that the delinquency is a serious matter and needs to be rectified- Has the attorney reviewed the affiliate policies and procedures to ensure that federal and state laws / regulations that affect collection and foreclosure practices are accurate?
What options are available to the affiliate in your state / county - have they been explored with homeowner? (e.g. Hardest Hit Fund)
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Debt Cancellation is not a recommended practice.- Ensure that the servicing policy covers these types of activities; and should include who has the authority to offer this option to homeowners.- Always engage a real estate attorney - Policy must be applied consistently to prevent unfair treatment to homeowners- Ensure to have complete documentation of circumstance that led to decision to cancel debtA 1099-C is not required for debt cancellation as long as the family remains part of a charitable class of persons (e.g. low income). The affiliate is providing a charitable benefit to member of the charitable class. However, if the partner family (for example) won the lottery or otherwise received a large windfall of money, then forgiveness of its debt would not be a charitable gift for a “charitable class of persons” and that debt forgiveness would be taxable.
- Is the Partner Family 120 days or more past due (state law may have different timing requirement)? If so, it is acceptable to file for foreclosure - contact an attorney with foreclosure experience to guide you- Is there a board-approved policy in place that outlines managing the process? Policy should contain adequate controls for operational compliance, legal and reputation risk associated with foreclosure activities. Further, controls should be in place to ensure consistent application of policy to all homeowners.- Ensure that full disclosure is made to the Partner Family of deficiency payments and other costs that will be recouped from them- What is the oversight in place for foreclosures?- What reporting is provided to the Board for oversight? - Have the documents that support foreclosure proceedings been properly endorsed/assigned?
- Are there loss mitigation options available for homeowner? Have you provided those options to the Partner Family?- Assessment of loss mitigation application must be managed to ensure that notification of complete and incompleteness to Partner Family is made within 5-days of receipt- Cannot "dual track"; foreclosure filing cannot be made while Partner Family is adhering to trial modification or forbearance agreement terms, or while the Partner Family is being evaluated for a loss mitigation option even if the borrower is more than 120 days delinquent. State law may require a longer timeframe, so ensure to know your state laws- Loss Met options should be made available to all Partner Families to ensure compliance with ECOA- For all Loss Mit applications, Partner Family must be evaluated for Ability-To-Pay. Title should be reviewed again to determine if additional liens have been place on the property- Any Loss mit applications that are denied, an adverse action notice must be sent to Partner Family
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GG HH- Does the servicing policy address options like short sales, deed in-lieu / cash for keys?- Ensure that local Real Estate attorney is engaged for these transactions and provide formal documents- Ensure to review for any applicable restrictive covenants, affordability period, and potential repayment requirements from DPAs when taking this option.- Ensure that full disclosure is made to the Partner Family of deficiency payments and other costs that will be recouped from them
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Escrow Management
Items to Consider
Do mortgage documents outline escrow provisions, if so, ensure to follow when applying cushion? State law may also govern escrow requirements - engage a local attorney
- Ensure to evaluate the standing of the mortgage; can the successor in interest continue to make payment on the mortgage etc.?- Should mortgage assumption be an option, provide successor in interest with information of assuming the loan
- Has the successor in interest provided evidence of death of the Partner Family, as well as, their identity and legal interest
- disbursement date is the date on which the escrow payment is made from the escrow account to the payee (e.g. taxing authority)- Is the payment for tax and insurance made on or before the deadline to avoid penalty, as long as the Partner Family is not more than 30 days past due ?- Any late fees charges from payee belong to the affiliate not the Partner Family, as long as the Partner Family is not more than 30 days past due- Are the funds advanced even when the escrow account is deficient? In cases when this occurs, the servicer can seek repayment from the Partner Family for the funds advanced, unless prohibited by local/state law.
- Does the servicing policy cover deceased homeowners? Ensure applicable federal and state laws are incorporated.- Policies should ensure that, upon notification of the death of a Partner Family mortgagor, the affiliate promptly identifies and facilitates communication with a successor in interest of the deceased with respect to the property that secures the mortgage loan.- Ensure that the provisions of the Garn-St. Germain Act which imposes limits on due-on-sale clauses as a result of death of a Partner Family are followed.
-‐Is the Partner Family current with their payments -‐ -‐has there been an increase in the rate for property taxes and or hazard insurance for the Partner Family?-‐ does the monthly amount collected meet federal requirements of a cushion no greater than one-‐sixth (1/6) of the estimated total annual payments; or at minimum, one-‐twelfth (1/12) of the total annual payments which the servicer reasonably anticipates paying from the account?
Has a successor-in-interest agreed to be added as an obligor or subsituted for the existing obligor on the mortgage? - If so ensure that the mortgage is
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Sample Escrow Calculator
- Force Placed insurance is used when the insurance of the Partner Family lapses/was not renewed. Affiliate should ensure that hazard insurance is always on the property to protect their collateral.- Small servicers are permitted to purchase force-placed insurance and charge the Partner Family for the cost of that insurance if the cost to the Partner Family is less than the amount the small servicer would need to disburse from the Partner Family’s escrow account to ensure timely payment of the Partner Family’s hazard insurance premium charges.- Ensure disclosures for force-placed insurance is delivered to homeowner
- Has an escrow analysis been completed for the Partner Family in the past 12 months to determine the Partner Family's monthly escrow payments for the next year?- Does the account have a surplus, shortage, or deficiency? Each may require a different treatment based on amount, currency of account, and or state laws. - Has the Partner Family been provided with an annual statement within 30 calendar days of the end of the computation year. The statement must containing the account history; projections for the next year; current mortgage payment and the portion going to escrow; amount of past year’s monthly mortgage payment and portion that went into the escrow account; total amount paid into the escrow account during the past year; amount paid from the account for taxes, insurance premiums, and other charges; balance at the end of the period; explanation of how the surplus, shortage, or deficiency is being handled; and, if applicable, the reasons why the estimated low monthly balance was not reached. - Ensure to review mortgage documents to determine if a cushion limit has been defined, and if so, the limit must be honored. If the limit is set higher than federal law requirement (no more than 1/6 of the estimated total annual disbursements from the escrow account), then the RESPA federal limit must be adhered to unless, state law provides for a lower amount.
Timeline - first disclosure notice to Partner Family is at least 45-days before charging for force-placed insurance; should you not receive evidence from the homeowner of hazard insurance coverage, provide another written reminder at least 30-days after the first notice. Still if no evidence of insurance coverage is provided, you may force-placed insurance 15-days after sending second notice.Should Partner Family provide evidence of insurance after force-placed insurance is in place, servicer has 15 days to cancel and refund the Partner Family for any periods of overlapping coverage.
Is there a process in place to ensure that properties in flood zones are adequately insured for the life of the loan?Ensure that properties in a flood zone have adequate flood insurance to protect the asset. Forced Place insurance is requried if the the property is under insured or insurance has lasped (proper notice must be provided to homeowner before purchasing forced place insurance)
timeline - if the homeowner has not purchased adequate flood insurance then, by the 45th day of sending the notice of required insurance, the servicer must purchase forced place insurance.
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Items to Consider
Items to Consider
Ensure that calculation to pay off is based on terms in the instrument; Generally, when shared appreciation is used, the timeline for responding by the 7th business day may not be achieved. This is acceptable within the law, but ensure that the payoff statement is provided within a reasonable time. (shared appreciation instruments should be separately recorded)
Is there a process to establish / document when the request was received so the payoff statement can be sent by the 7th business day to Partner Family?
In cases where deed restrictions are in place, ensure to communicate to Partner Family
Has the information /error been investigated, if so, in the case of an error, was a correction required?
-Are there any subordinate liens on the property including subsidy providers?-Are there any fees outstanding?Ensure the amounts above are included in the total outstanding balance that will payoff the obligation in full.
- When a written request is received from a Partner Family, is there a process to establish / document when the request was received so the acknowledgement can be sent to Partner Family by the 5th day?
Is there an established policy and procedures for releasing the lien and cancelling the promissory note? - Has a Release of Deed of Trust / Satisfaction of Mortgage (may have a different name locally) been submitted to the county recorder's office to release any lien(s) (as applicable)? This releases the affiliate's interest in the property as collateral- The promissory note should be cancelled and provided to the homeowner as proof that the loan is paid off- Escrow Accounts must be closed out, and a short year statement completed (provided to the homeowner) and any surplus refunded to the homeowner within 60 days of payoff.
- Is there a process established to manage complaints? - Is there a reporting and or recording mechanism in place to capture complaints and resolutions?- Is resolution to borrow appropriate and approved by the correct authority in the affiliate?
Has a written notification of the error, correction or details of the requested information been provided within 30-days or no later than 45-days to the Partner Family?
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Items to Consider
- Follow timeline listed above for Acknowledgement and Resolution- Affiliate is not required to provide information that is not in your control or possession, or cannot retrieve in the ordinary course of business- Affiliate is not required to provide documents relied upon that constitute confidential, proprietary, or privileged information
-‐ Does the servicing policy address record retention? -For each mortgage account, does the file electronic or hard copy contain all documents related to actions taken with the loan. Such as credits / debits to the account, including escrow and any suspense account entries; copy of the security instrument ; any notes created by servicer reflecting communications with the Partner Family; copies of information / documents provided by the Partner Family to the servicer for error resolution and or loss mitigation?
- Refer to Information Request section
- Are there standards in place to ensure customer information is adequately secured to prevent confidential information from being compromised?
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Items to Consider
Reminders
Does your loan servicing policy cover reporting to the credit reporting agencies (CRAs) - Equifax, Experian, TransUnion (there are others, but these are the big 3 nationwide providers); and how to manage notification from a CRA that information that affiliate furnished is being blocked because of identify theft?
It is good practice to set a frequency to review all policies/procedures and update based on changes with laws, regulations, increased controls, and other circumstance that may have resulted in a change to lending practices.
All customers (Partner Family) must receive a notice every 12 months
- A small servicer typically cannot report directly to a CRA because there is a minimum number of accounts required, and generally most affiliates don't meet the minimum accounts.- Who is the service provider that transmits your account information to CRAs? - Ensure to have a contract with the service provider - discuss who will manage disputes, what data integrity checks will be in place to ensure that accounts contain no errors prior to upload etc.- Affiliate that use Keystone servicing software, transmission is done thru KeyCredit (a companion product). KeyCredit coverts the data in a format that is acceptable to transmits to CRAs. Keystone only transmits to Equifax.
- All information reported must be accurate and current (ensure that delinquency is characterized accurately before reporting)
Partner Family can dispute errors through a CRA or the affiliate regarding information that affiliate furnished to CRAs.- Ensure that a thorough investigation is conducted and results provided to the CRA or Partner Family within 30 days- Affiliate is only required to investigate disputes that involve information that they have furnished; such as fraud alerts, judgments and other public records
Each Partner Family must receive an Annual Escrow Account Disclosure statement at minimum every 12 months- refer to Escrow Management section
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GG HHShould your affiliate use service providers, it is required that there is an effective process of managing the risks of the relationship.- How thorough is the level of due diligence conducted on the provider, what is the frequency of the due diligence?- Has the service provider delivered on the contract - has the service been satisfactory, has there been any complaints from Partner Families or affiliate members related to the service provider?- What laws must the service provider comply with, and how do you ensure that compliance is being met? - Is there sufficient internal controls within the affiliate for monitoring of the providers practices?
Ensure that all names in portfolio are ran against the OFAC database at the frequency established in the AML policy. At minimum, low risk affiliates should perform this check at lead semi-annually.Ensure all loans closed in a flood zone is still adequately insured.
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