The stakes continue to rise for mortgage lenders and servicers as state attorneys general and state financial services regulators step up their enforcement actions. Mortgage lenders and servicers have dedicated significant resources to compliance over the past several years. Although federal enforcement actions may eventually decrease as the Trump administration pledges to reduce federal regulation, institutions should remain vigilant with respect to compliance risk as state attorneys general and state financial services regulators are already stepping up their enforcement of both federal and state consumer financial protection laws to more than offset the expected federal decrease. Examples include recent Multi-State Mortgage Committee (MMC), California Department of Business Oversight, and New York State Department of Financial Services Consent Orders against several large mortgage banks. These state regulators will likely bring actions against mortgage lenders and servicers to enforce state laws that are not preempted, and that go “above and beyond” or are more stringent than similar federal laws. As institutions shift their focus from federal laws to state laws, they face operational and compliance challenges.
Navigant has worked with banks and nonbanks of all sizes and complexity. Generally, mortgage lenders’ and servicers’ policies, procedures, processes, and systems appear to take into account federal laws; however, they are struggling with updating these to comply with each separate state-specific law. While there are frequently an unwieldy number of state laws, Navigant has noted five recurring areas where mortgage lenders and servicers are struggling as they operationalize these state specific nuances.