Federal regulators delivered that message in October 2013, reminding loan servicers that they are subject to fair lending liability and must manage their fair lending risks. The regulators’ message concerning “fair servicing” risk has been repeated recently, reflected in settlement provisions that require loan modifications to be implemented in ways that avoid geographical disparities or discrimination against protected classes. For example, the Consumer Financial Protection Bureau (CFPB) included such provisions in the recent consent order it entered into with Ocwen, a large non-bank servicer. Specifically, the consent order resolved claims related to Ocwen’s loss mitigation and foreclosure practices, but it left open the possibility of claims for discrimination. Along with other recent consent orders and regulatory pronouncements, the Ocwen settlement terms indicate regulators are scrutinizing fair servicing issues.
Concerns about fair servicing can arise across asset classes— including mortgage loans, personal loans, student loans, credit cards, and even business loans. Given the heightened regulatory attention to this issue, servicers should develop or enhance proactive risk mitigants, including preventative and detective controls.
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