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MBA Compliance Essentials℠:
Consumer Complaints Resource Guide
3
TABLE OF CONTENTS
Author Biographies and Information abou...
MBA Compliance Essentials℠:
Consumer Complaints Resource Guide
6
SUMMARY OF COMPLIANCE RESOURCE CONTENTS
This section of t...
MBA Compliance Essentials℠:
Consumer Complaints Resource Guide
7
mortgage company should ensure that these consumer inquir...
MBA Compliance Essentials℠:
Consumer Complaints Resource Guide
8
A covered person subject to supervision and primary enfor...
MBA Compliance Essentials℠:
Consumer Complaints Resource Guide
14
 include methodologies for assessing a servicer’s compl...
MBA Compliance Essentials℠:
Consumer Complaints Resource Guide
15
Appendix A
State Law Requirements
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ba.org/com
pliance
MBA Compliance Essentials℠:
Consumer Complaints Resource Guide
16
STATE LAW REQUIREMENTS
Several states' mortgage banking ...
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MBA Compliance Essentials: Consumer Complaints Resource Guide

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The MBA Compliance Essentials Consumer Complaints Resource Guide™ is a part of the MBA Compliance Essentials Program, which includes deep-dive webinars and comprehensive resource guides to serve as base for the development of your company's policies and procedures in these important areas. This is only a sample purchase the full Resource Guide at www.campusmba.org

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MBA Compliance Essentials: Consumer Complaints Resource Guide

  1. 1. MBA Compliance Essentials℠: Consumer Complaints Resource Guide 3 TABLE OF CONTENTS Author Biographies and Information about the Firm ................................................................................... Page 4 Summary of Compliance Resource Contents ............................................................................................. Page 6 Statutory Background and Requirements ................................................................................................... Page 6 State Law Requirement ........................................................................................................Page 15, Appendix A Model Draft Customer Complaint Policy ..............................................................................Page 24, Appendix B Policies and Procedures Checklist .......................................................................................Page 36, Appendix C CFPB Company Portal Manual ............................................................................................Page 41, Appendix D m ba.org/com pliance
  2. 2. MBA Compliance Essentials℠: Consumer Complaints Resource Guide 6 SUMMARY OF COMPLIANCE RESOURCE CONTENTS This section of the resource guide discusses the various provisions of federal and state law, and agency guidelines that address or impact how lenders handle complaints from residential mortgage loan borrowers and others with respect to mortgage origination and loan servicing. The section on "Statutory Sources of Requirements for Handling Consumer Complaints" explains the legal basis for consumer complaint systems. The discussion of Disclosures and Notices describes the form, content, and timing requirements or suggestions for handling of consumer complaints. It also includes intake materials for the CFPB system. STATUTORY SOURCES OF REQUIREMENTS FOR HANDLING CONSUMER COMPLAINTS Mortgage companies can receive complaints that originate directly from consumers or come from various agencies in different forms. The discussion in this section regarding sources of consumer complaints provides an overview of the separate agencies and regulators responsible for coordinating consumer complaints. Companies have varying responsibilities depending on the source of the complaint. As discussed below, companies should take note of the numerous sources from which potential complaints may be received. Further, companies should take note of the timing requirements under the various agency issuances to ensure compliance with specific regulatory provisions. For example, the CFPB consumer complaint portal manual requires companies to respond to a consumer complaint within 15 days and close out the complaint within 60 days of receipt. Other regulators, such as the FHA, encourage “prompt” responses but do not require a specific time requirement for providing a consumer with a response. Meanwhile, regulations under the Real Estate Settlement Procedures Act (RESPA) require mortgage servicers to send an acknowledgment of receipt to the consumer within five (5) days. Moreover, states have their own mortgage banking regulations and statutes with which companies must comply. Companies subject to state law should note that federal law does not preempt state law regarding consumer complaints. Thus, states are free to establish their own requirements for answering consumer complaints. Also, some states have established offices for monitoring or receiving consumer complaints against companies conducting business within those states. Relevant state provisions regarding consumer complaints are outlined below. A “complaint” may differ under various regulatory requirements or a mortgage company’s policies and procedures. For instance, a "complaint" may or may not be considered a Qualified Written Request (QWR) under the RESPA, or an escalated process under the Home Affordable Modification Program (HAMP) or the Fannie Mae and Freddie Mac Servicer Alignment Initiative. Also, a "response" could mean a lender has acknowledged or investigated the matter and indicated to the consumer the next steps for resolution. Additionally, "resolution" could have a prescribed meaning, such as under the Regulation Z billing error notice requirements for HELOCs. Such term could also be used merely to describe one of several outcomes in a voluntary consumer complaint process. Thus, financial services companies should have in place policies and procedures, along with applicable timelines to address consumer complaints, in order to protect against reputational risk, operate in safe and sound manner and otherwise comply with applicable regulatory requirements. A mortgage company should have procedures and systems in place to be able to respond to borrower inquiries and complaints relating to the origination and servicing of mortgage loans. A m ba.org/com pliance
  3. 3. MBA Compliance Essentials℠: Consumer Complaints Resource Guide 7 mortgage company should ensure that these consumer inquiries and complaints are provided fair consideration, given timely and appropriate responses, and that consumers are provided with a sufficient resolution. Companies can achieve these measures by implementing the appropriate policies and procedures to manage the consumer complaints that arise. Most importantly, mortgage companies should remember that consumer complaints can come from various sources and require different timeframes for acknowledging and responding to the consumer. The assorted agencies and regulators also have varying timeframes for responding to complaints, requests for information, or notices of error. Moreover, within one agency’s rules, there may be different timeframes depending on the type of consumer complaint or request. For example, CFPB regulations will generally require a company to acknowledge a qualified written request within five (5) days but allow lenders 15 days to respond to other consumer complaints received through the CFPB Portal. Finally, note that certain aspects of this area of regulation and guidance are new and evolving, some of the provisions outlined below are merely guidelines or suggestions, and the rules and expectations in the area of handling consumer complaints undoubtedly will continue to evolve. Administrative Oversight The CFPB has enforcement authority with respect to Federal consumer financial laws over “covered persons”, including non-bank mortgage companies and "large" depository institutions.1 Federal banking agencies also retain enforcement authority as prudential regulators over institutions subject to or transferred to their jurisdiction (the OCC for “small” national bank and thrifts, the Federal Reserve, NCUA and Farmer Credit Administration for small creditors subject to their supervisory authority). Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), Congress directed the CFPB to establish, in consultation with the appropriate Federal regulatory agencies, reasonable procedures to provide a timely2 response to consumers, in writing where appropriate, to complaints against, or inquiries concerning, a covered person (encompasses depository institutions and mortgage companies), including:  steps that have been taken by the regulator in response to the complaint or inquiry of the consumer,  any responses received by the regulator from the covered person, and  any follow-up actions or planned follow-up actions by the regulator in response to the complaint or inquiry of the consumer.3 Under the Dodd-Frank Act, a covered person subject to supervision and enforcement by the CFPB is required to provide a timely response, in writing where appropriate, to the CFPB and any other agency having jurisdiction over such covered person concerning a consumer complaint or inquiry, including:  steps that have been taken by the covered person to respond to the complaint or inquiry of the consumer,  responses received by the covered person from the consumer, and  follow-up actions or planned follow-up actions by the covered person to respond to the complaint or inquiry of the consumer.4 1 12 U.S.C. §§ 5481(12)(G), 5514(c), and 5515(c). 2 Please note, the term “timely” is not defined by the Dodd-Frank Act. 3 Dodd-Frank Act section 1034(a). 4 Dodd-Frank Act section 1034(b). m ba.org/com pliance
  4. 4. MBA Compliance Essentials℠: Consumer Complaints Resource Guide 8 A covered person subject to supervision and primary enforcement by the CFPB shall, in a timely manner, comply with a consumer request for information in the control or possession of such covered person concerning the consumer financial product or service that the consumer obtained from such covered person, including supporting written documentation concerning the account of the consumer.5 A covered person subject to supervision and primary enforcement by the CFPB, a prudential regulator, and any other agency having jurisdiction over a covered person (subject to supervision and primary enforcement by the CFPB) may not be required by this section to make available to the consumer:  any confidential commercial information, including an algorithm used to derive credit scores or other risk scores or predictors,  any information collected by the covered person for the purpose of preventing fraud or money laundering, or detecting or making any report regarding other unlawful or potentially unlawful conduct,  any information required to be kept confidential by any other provision of law, or  any nonpublic or confidential information, including confidential supervisory information. 6 CFPB Portal The Dodd-Frank Act directs the CFPB to facilitate the coordinated collection, monitoring, and response to consumer complaints regarding certain financial products and services. The CFPB began handling mortgage complaints through the Portal on December 1, 2011. Participation in the Portal currently is not mandatory. The Bureau has made clear, however, that its supervision authority will be complaint driven and that companies with significant complaints will be a priority for further review and monitoring. Companies, therefore, should sign up to receive, review and respond to their customers' complaints lodged through the CFPB's Company Portal. To request access to the Portal, a company should designate an authorized point of contact, who can request access to the Portal by submitting a request through the Help tab via the Submit a Ticket link on the Portal. The ticket should include the company name, and the company representative’s name, phone number, and email address. The CFPB Consumer Response team will review your request and follow-up with your company’s point of contact. To log in to the Portal, users should go to https://secure.consumerfinance.gov and use the email address provided when a user name and access were requested and provided. Once logged into the Portal, a user will be able to view all of his or her company’s complaints. Once a complaint is logged in the Portal, companies are given 15 days to provide a substantive response to a consumer's complaint. Companies then have 60 days to close out the complaint, although extensions may be requested and granted. Note, however, that the response times indicated in the Portal do not replace or satisfy statutory or regulatory requirements for responding to consumer complaints, including the timelines required under those statutory or regulatory requirements. The CFPB Company Portal manual requests that a company provide a response to each complaint through the Portal within 15 calendar days of the complaint being received. The suggested Portal response time requirements do not replace statutory or regulatory requirements. In circumstances when a complaint cannot be closed within 15 calendar days, a company may 5 Dodd-Frank Act section 1034(c)(1). 6 Dodd-Frank Act section 1034(c)(2). m ba.org/com pliance
  5. 5. MBA Compliance Essentials℠: Consumer Complaints Resource Guide 14  include methodologies for assessing a servicer’s compliance with its escalation policies. These methodologies must be included in a mortgagee’s quality control Plan.16 National Servicer Settlement Pursuant to the National Mortgage Settlement (NMS) entered into by five large servicers with 49 states' attorneys general, HUD and the Department of Justice in February 2012, the five bank servicers are required to adopt enhanced billing dispute procedures, including:  Implementing methods for lodging complaints, including toll free numbers on the monthly billing statement and email access,  Maintaining adequate staff to respond properly to billing disputes,  Establishing a dispute escalation process, and  Implementing procedures to promptly correct errors, including inaccurate reports to credit reporting agencies. Servicer also must communicate with the borrower’s authorized representative, upon the written request of the borrower. This includes communicating with states' attorneys general or financial regulators acting on a written complaint submitted by a borrower and forwarded to the servicer. Bank servicers also are required to develop loan portals in which:  Borrowers can check, at no cost, the status of their loan modifications,  Housing counselors can communicate with banks/servicers, and  Banks/Servicers shall update the status of pending loan modifications every 10 (business) days. Bank servicers also are required to ensure that their vendors follow the procedures and process outlined in the NMS. Such vendors include sub-servicers. Fair Lending Complaints Consumers may submit complaints regarding lender discrimination under fair lending laws through a number of channels. A consumer may complete an electronic form through the CFPB Portal, send a written demand letter through an attorney, or file a complaint with a state regulator or HUD, among other means. Mortgage companies should be aware that fair lending complaints are perhaps the number one priority for the CFPB and other agencies at this time. Any consumer correspondence of complaints that addresses or mentions discrimination should be immediately escalated to counsel or the Board of Directors for further and immediate review. Generally, a properly trained and experienced attorney can be of great assistance in determining the proper legal action and timing for response that is necessary given the type of complaint. For example, if an actual demand letter is received, the expected time for a response may be stated in the letter. It is important to keep in mind that discrimination can be alleged through any of the agencies or media noted above, and mortgage companies must treat allegations of discrimination with the utmost care. 16 Id.; Id. § 4000.1.V.A.3.ii. m ba.org/com pliance
  6. 6. MBA Compliance Essentials℠: Consumer Complaints Resource Guide 15 Appendix A State Law Requirements m ba.org/com pliance
  7. 7. MBA Compliance Essentials℠: Consumer Complaints Resource Guide 16 STATE LAW REQUIREMENTS Several states' mortgage banking statutes impose requirements on mortgage companies with regard to consumer complaints. Further, many state mortgage banking regulators will review how well a licensed mortgage company subject to its jurisdiction operates regarding complaints, and whether the company is handling and responding to consumer complaints in a prompt and effective manner. At least one state’s mortgage banking statute authorizes the regulator to furnish consumer complaints involving mortgage companies to the NMLS.17 Many states have also adopted the Joint Statement On Sub-prime Lending For State-Licensed Mortgage Lenders (the Statement), issued by the Conference of State Bank Supervisors, the American Association of Residential Mortgage Regulators, and the National Association of Consumer Credit Administrators in 2007.18 The Statement, which is non-binding guidance that addresses risks associated with certain subprime mortgage products and lending practices, instructs mortgage lenders to review consumer complaints to identify potential compliance problems or other negative trends. Additional specific state law requirements are discussed below. Alabama No applicable requirements found in the state mortgage lender licensing statute(s). Alaska No applicable requirements found in the state mortgage lender licensing statute(s). Arizona No applicable requirements found in the state mortgage lender licensing statute(s). Arkansas The managing principal or branch manager of a licensee under the Fair Mortgage Lending Act must, among other things, establish procedures for handling consumer complaints.19 California Under the California Finance Lenders Law20 and the California Residential Mortgage Lending Act,21 if a licensee receives any reportable consumer complaints involving loans subject to the Guidance on Nontraditional Mortgage Product Risks (Guidance) and the Statement on Subprime Mortgage Lending (Subprime Statement), the licensee must maintain a copy of each complaint and the lender's written response or explanation of how the lender resolved the complaint, including any workout arrangement.22 The lender must maintain this documentation as part of its books and records and must make the documentation available to the Commissioner upon request.23 All lenders must provide loan applicants with a Fair Lending Notice that contains the name and address of all offices where a borrower may file a complaint against the lender.24 Colorado No applicable requirements found in the state mortgage lender licensing statute(s). Connecticut No applicable requirements found in the state mortgage lender licensing statute(s). Delaware No applicable requirements found in the state mortgage lender licensing statute(s). 17 See La. Rev. Stat. Ann. § 1088.4. 18 Joint Statement On Sub-prime Lending For State-Licensed Mortgage Lenders, June 27, 2007, available at https://www.csbs.org/regulatory/policy/policy-guidelines/Documents/Final_CSBS-AARMR- NACCA_StatementonSubprimeLending.pdf. 19 003-14 Ark. Code R. § 009(5008-1(b)). 20 Cal. Fin. Code §§ 22000 et seq. 21 Cal. Fin. Code §§ 50000 et seq. 22 Cal. Code Regs. tit. 10, §§ 1436, 1950.314.8. 23 Cal. Code Regs. tit. 10, §§ 1436(c), 1950.314.8(c). 24 Cal. Health & Saf. Code § 35830; Cal. Code Regs. tit. 21, § 7114. m ba.org/com pliance

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