How the Subprime Mortgage Crisis Changed Servicers

Economic index representation over image of US $100 billThe increased oversight of the mortgage servicing industry following the subprime mortgage crisis has led to significant changes in the way mortgage servicers operate and how they interact with borrowers.

One of the key changes has been the implementation of new regulations and rules designed to improve transparency and protect borrowers from unfair or deceptive practices.

For example, in 2013, the Consumer Financial Protection Bureau (CFPB) issued new mortgage servicing rules that require servicers to provide clear and timely information to borrowers about their options for avoiding foreclosure, as well as establishing procedures for handling loan modification applications and other borrower requests.

The increased oversight has also led to greater scrutiny of the practices of mortgage servicers and has resulted in a greater focus on compliance and risk management. Mortgage servicers are now required to maintain detailed records of their interactions with borrowers and to provide regular reports to regulators on their servicing practices.

In addition to regulatory changes, mortgage servicers have also implemented internal changes to improve their operations and to ensure compliance with the new regulations. This includes investing in technology and staff training to improve their processes for managing loans and foreclosure proceedings.

The increased oversight has also led to the implementation of national mortgage servicing standards: In 2012, the Office of Mortgage Settlement Oversight (OMSO) was established to monitor the implementation of the National Mortgage Settlement, a landmark agreement between the federal government and five of the largest mortgage servicers. As part of the settlement, the servicers agreed to implement new national mortgage servicing standards, which included requirements for better communication with borrowers, improved loss mitigation processes, and better training and staffing.

There are also more non-bank servicers. In the wake of the foreclosure crisis, many of the largest banks and mortgage lenders scaled back their mortgage servicing operations. This created an opportunity for non-bank servicers to enter the market and gain market share. Today, non-bank servicers are a significant part of the mortgage servicing industry, and they are subject to many of the same regulatory requirements as bank servicers.

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