Will McDermott is editor of Scotsman Guide Residential Edition.
Reach him at (800) 297-6061 or firstname.lastname@example.org.
Partner, Powers Kirn LLC
By Will McDermott
Edward Kirn is a partner with the law
firm of Powers Kirn LCC in the greater
Philadelphia area and is also president
of USFN, a national nonprofit association of select law firms, trustee
companies and industry-specific
service providers. Kirn graduated with
a bachelor’s degree in economics
from Allegheny College and earned
his Juris Doctor from Ohio Northern
University College of Law.
Mortgage servicers face unique compliance issues
Mortgage servicing is an integral part of the mortgage industry. Even banks that keep loans on their balance
sheets often contract with a mortgage servicer to collect and process monthly mortgage payments, deal with
escrow issues and handle foreclosure actions. The company servicing the loans an originator closes will have far
more interaction with borrowers than the originator, so it makes sense for originators to understand the issues
facing the servicing industry.
USFN is an association of attorneys that specialize in the practice of law surrounding mortgage and loan-default
servicing. The association, which has been in existence for almost 30 years, has members in all 50 states and
several U.S. territories. Edward Kirn, current president of USFN and a partner in the law firm of Powers Kirn LLC,
spoke with Scotsman Guide about the current issues facing mortgage servicers.
How has mortgage servicing changed since the housing crisis?
The amount of regulatory time and oversight and compliance that our clients in the industry focus on today
pales in comparison to 10 years ago. It’s not even comparable. The amount of money being spent on compliance
is an enormous amount of money, by the lenders, the originators, the servicing agents and then their vendors,
because of the third-party oversight requirements imposed by the Consumer Financial Protection Bureau (CFPB).
What is the biggest challenge facing mortgage servicers today?
Their vendors are experiencing a dramatic decrease in the amount of foreclosures. They have built up these huge
systems to comply with all of the regulations, and now the volume isn’t coming through, and you would think
that would be easier from a compliance standpoint. Now we’re looking at X number of files per day instead of Y.
That is true to some extent, but the cost of those compliance safeguards that have been put in place needs to be
adjusted somewhat and the cost of the oversight needs to be adjusted as we go into a declining-volume market.
How will hurricanes Harvey and Irma affect the foreclosure market?
While the numbers may not be high right now [for] the defaults, those are probably going to accelerate, unfortunately. Some of the businesses that have been adversely impacted by those two storms probably have just started
or haven’t even laid off staff yet, or even decided if they’re going to reopen or shutter their businesses. Those are
absolutely going to have an effect. I know it is something all of my clients are actively looking at. They’ve all mobilized their operations — even before the storms impacted the U. S. — to discuss how they were going to handle the
situation and how best to treat their borrowers and customers to assist them through a very difficult time.
What major regulatory/compliance issues are servicers facing?
There are regulations going into place regarding successor in interest, areas of the law where a borrower may
die and then leave heirs. Those heirs are not known to the lender. They have no existing relationship with the
lender, but they’re taking over that property. The successor-in-interest regulations will require the heirs in some
instances … to have the same rights as a borrower under the rules, so banks will have to treat them exactly the
same as the borrower, even though they have no pre-existing relationship with that person. The body of law
servicers are going to have to absorb is enormous. Probate laws change from jurisdiction to jurisdiction — not
just state, but sometimes county to county.
And there are FDCPA [Fair Debt Collection Practices Act] concerns. The CFPB has written suggested safe harbors,
but while the CFPB has direct oversight of enforcing FDCPA, it has no authority to change it. Only Congress can
make those changes. So, while those safeguards — the safe harbors — are helpful, that’s not going to keep
[servicers] and their vendors from being sued, and it doesn’t necessarily mean a court of law is going to follow
those safeguards and the safe harbors either.
Is USFN advocating for any regulatory changes?
USFN is not a PAC [political action committee]. It’s a not-for-profit organization. We do basically grassroots efforts to change legislation. I know Rep. Dave Trott [R-Mich.] currently has a bill pending that would amend the
FDCPA. USFN is also in the process of creating a matrix of all of the successor-in-interest documents across the
country that our clients are going to need. We’re aiming to get that out before the end of fall. It’s a huge task and
a lot of information, and a lot of vetting that needs to be done. n