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New Mortgage Servicer Requirements - Koch, SVP Morningstar Credit Ratings

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Richard Koch, SVP of Morningstar Credit Ratings provides detailed information on new CFPB servicing requirements.

Koch is a Senior Vice President in the Operational Risk Assessment Group at Morningstar.  He is responsible for overseeing the development and publication of all residential mortgage and consumer finance industry-related evaluation and ranking criteria.


0:08 Intro

The Five Star Radio presents Mortgage Market Today, where industry experts discuss capital market, trading, real estate lending, and the mortgage servicing industry. For more information on guest at The Five Star Radio -- Mortgage Market Today and podcast the previous episode visit us at thefivestarradio.com. The Five Star Radio is brought to you by iServe Company. Now, your host at The Five Star Radio -- Mortgage Market Today, Louis Amaya.

0:38 Louis Amaya

Welcome to Mortgage Market Today. My name is Louis Amaya. Today is December 11, 2013. The Consumer Financial Protection Bureau or the CFPB first release this proposed National Servicing Standards for common on August 9, 2012. Now, the final rule is going to effect on January 10, 2014. The rules changed the mortgage servicing standards that apply both under the Real Estate Settlement Procedures Act (RESPA) and the regulation acts and the Truth in Lending Act (TILA) Regulation Z. The combined set of final rules covers nine mortgage servicing areas small services those that service 5,000 or pure mortgage loans are exempt from some of these requirements and have reduced requirements relative to larger services. All the final rules take effect on January 10, 2014 the timing of the publication of the final rules gave mortgage services just under a year to prepare and become fully compliant. Joining the broadcast today to discuss the CFPB servicing rules and what it means for the servicing industry is Richard Koch, Senior Vice President of Operational Risk Assessment at Morningstar Credit Ratings. Richard s responsible for overseeing the development and publication of all residential mortgage and consumer finance-related evaluation and ranking criteria. Prior to joining Morningstar, Richard spent 14 years working for another rating agency where we author the first Australian services reviews and played an integral role in the development and growth of servicing rankings in the United States, Australia, Europe and Japan.

2:44 Louis Amaya

Richard, thanks for taking a time to join the broadcast.

2:47 Richard Koch

Thanks, Louis. It's good to be with you this morning.

2:51 Louis Amaya

Before we get into it why don't you give us a little background on what you do specifically for Morningstar and about the Operational Risk Assessment division.

3:03 Richard Koch

Okay, well I am the senior analyst on the Residential Consumer Finance side. I am responsible for developing the criteria that we used to analyze and rank mortgage servicers and affiliated entity use in the mortgage servicing space both here and the United States and abroad, and on that note Morningstar is approach to Operational Risk Assessment is sort of unique in the industry. For when our analyst had experienced of experience in the loan servicing industry of self possessing both direct operational experience in essence all of us have worked in mortgage servicing kind of you know I am a front lines for well over 10 years and each one of us in the group has many years of experience analyzing and assessing operational risk from a rating agency prospective. I have been in the rating agency role myself for about 15 years reviewing the loan servicing industry. One of the difference is we decided to do when we join Morningstar and we kinda developed our operational risk assessments to encompass all areas of loan servicing industry risk on what I would like to call a holistic basis. A big part of the mortgage servicing industry if the service is reliant on external third party vendors and all the interaction and reliance between servicers and the vendors they use. In fact during this year, we published the first ever evaluations of vendors here in the United States component servicers or your last set managers and also offshore in India we published an evaluation of the firm located offshore and I think our holistic approach operational risk assessments provide market participants with the must more complete and accurate view of the loan servicing industry because they get to look at all the interaction between all of the players and it could not be more timely as we are seeing now with the unprecedented focus and regulatory screw beyond the service and the industry as well as the vendors they are using. I am sure that you are aware of the issued guy needs to bangs on how to manage the third party relationships and of course the CFPB rules that we will be talking about today that focus on much on services and what servicers do by extension involve the vendors that the servicing industry relies on so much. So our individual assessments we think really provides market participates with the much better understanding of the residential loan servicing industry at a very _05:31_ time now that all of these regulations are coming to the forefront especially to CFPB servicing rule which I know will be talking about a little more in depth today.

5:42 Louis Amaya

Yeah. You talk about the OCC and how it impacts really the regulations are not just regulated to the large servicer because it really impacts the vendors so it's really an industry wide phenomena that's really changing how we do business today so we have the new rules going in a fact January 10th, but it does not apply across the broad to all servicers in the same fashion, correct?

6:10 Richard Koch

That's correct Louis. There is an exemption for small servicers and the CFPB essentially define some small servicers having 5,000 or fewer mortgage loans or if the servicer is a housing finance agency and that is define in the scope of the CFR referral regulations. If an entity services view within 5,000 loans that were not originated or own by that entity, the entity is not a small service so they don't get that exemption. Also for servicers and some of the listeners maybe wondering about this, a servicer that increased their servicing portfolio above the 5,000 loans threshold during the course of account in the year they lose that exemption effective six months from the day that they no longer need that criteria in essence to 5,000 loan threshold or January 1st of the following calendar year, whichever it is later. Small services were also exempt from some in the provisions of the mortgage servicing rules and just in touch on touch briefly those can include the periodic statement provision, channel servicing policies and procedures first place hazard insurance requirements to advance escrow early intervention provisions continuity provision certain loss mitigation provision so I probably go into more depth during the broadcast about those other provisions, but there are exemptions for small services and I think for the purpose of our conversation today we'll be focusing on the servicer that are impacted that don't have that exemption that service more than 5,000 rounds, but you're correct it doesn't apply to everyone and that exemption does exist. So if you are listening and you have servicer that has less than 5,000 loans if you have and already become acquainted with CFPB rules I would urge you to check the latest rules on their website.

8:08 Louis Amaya

The 5,000 number is somewhat arbitrary, right? Because 5,001 and 5,000 there is really no difference but the impact is huge really small servicers to me would be somewhere under 15,000 or 20,000 but that's just my opinion. There has been some criticisms that existed for many years regarding the lack of consistency and billing statements provided to borrowers, especially in the instances of contested foreclosures and proof of claims. How does the new regulations address this controversy as I would say?

8:46 Richard Koch

Yeah, as we've mentioned that issue was existed for years. There has been numerous litigated cases regarding proof of claims and how payment statements that were presented to the Court have not been accurate and as you are aware there is different technology in the industry and pain and statements are produced in different ways with all the kinds of different transaction curves. So there has been a lot of consumer pushed back on that as well as regular charge scrutiny. Under CFPB rules essentially services are required to provide the borrower with a written mortgage statement from his billing cycle and just on the side of billing cycle as the fund on CFPB aligned itself with the frequency of scheduled payments and whether that is monthly, quarterly so you will get the billing statement when your payment is due whatever billing cycle that you are on and there is a lot of information that has to be illustrated in that payment statement and some of that could be amount at the borrower owes on the current bill and the amount to be applied the principle interest and escrow and this is important to know if the services, especially borrowers that have an option on the loans. If the loan has multiple payment options the statement must show whether the principle balance will increase, decrease or stay the same for each option listed. That is a bit owners and servicers have to be aware that their statement have to include that information and of course the amount and then your late fees or total fees of post payments to borrowers made some of the last statement you have to itemize how previous statements or apply principle interest escrow late fees, etc. A transaction history and the need to itemize any fees or charges assess to the account information on amounts that are help in suspense. The statement also has to provide a toll-free number and if available an email address where consumers can obtain more information about their account and the CFPB says that has to be on the 1st page of any statement by the way. Account information regarding the CFPB the current interest rate state where the future interest rate may change also the existence of any pre-payment penalty those of course were very prevalent during the man prime loan origination there enough so much anymore.

11:10 Richard Koch

But also housing councilor information and if you're a servicer that is servicing five weekly mortgage loans, you can use a single monthly statement with a breakdown. You don't need to provide statements every two weeks and this is what you the CFPB euphemistically called the periodic statement. Also under the CFPB guideline, it has to be generated or issued to the borrower within a reasonably prompt time after the payment due date or courtesy period and as defined by the CFPB, the reasonably prompt standard generally means delivering, emailing and mailing the statement within four days of the close of the courtesy period and, you know, there is a certified also for delinquent accounts, so in instances where the loan is 45 days delinquent additional information must also be on the periodic statement and that has to have a reference to the housing counselor information, the data which the consumer became delinquent. A notification of possible risk and expenses, not specifically revolves around any foreclosure fees or legal fees that might be incurred if the delinquency is incurred. A six-month account history or history since the account was less current, a notice showing any lost mitigation program the customer has agreed to, noticed that you have made the first notice of filing, if you commenced the foreclosure. The total payment the consumer will have to make to bring the account current, there is a consumer opt and out on this -- consumers can opt out by getting these statement but finally the periodic statement on acquaintance CFPB, the information on that must be clear and conspicuous. They don't go into a lot of detail, although there are some samples on the website, some indication but it generally requires that the disclosures on the periodic statement have to be presented in a reasonably understandable form.

13:07 Richard Koch

You know, one the things I've seen some services do in recent years is migrating away from the transaction codes and working on the servicing side for years would like to be pay off statements and pack disbursements or other escrow disbursements would have a transaction types of code and _13:23_ obviously does not know what those -- you really need a key to evaluate what those are, so there has been a trend in the industry to have transactions list down their complain in English, real estate taxes, hazard insurance, disbursement, legal fees, foreclosure fees and such and I think more and more that is what the CFPB is looking for and I think the servicing industry is heading in that direction.

13:48 Louis Amaya

Wow. That's only the first question really and I'm already feeling overwhelmed and I have about seven or eight more. I know force-placed and lender-placed insurance is also a controversial area and has been subject to many customer disputes and regulatory involvement. How does the CFPB address insurance?

14:11 Richard Koch

Well, you're right, there has been kind of a contentious issue for a long time and historically, when we look at the servicer just had on the side, we collect a lot of data from servicers and we are focusing on hazard insurance, we look at the placement rate, in other words the percentage of the portfolio where they do force-placed hazard insurance. We look at the cancellation rate on an annual basis, the percentage of those policies that the servicer had to cancel because the borrower provided evidence of forced-placed insurance then we look at the renewal rate, the annual renewal rate and that gives us an indication on how many of those policies were accurately placed, the borrower perhaps could not get better insurance or likely insurance of the servicer was able to obtain from them so that gives us a certain outlook into the veracity of what the servicer is doing, the quality control are they legitimately putting people --reviewing policies, putting people on force-placed insurance in the legitimate way. None of us hit that the answer your question, this is a _15:17_ issue for the CFPB. The force-placed insurance is often much more expensive than insurance that are borrowed and get on their own and does not cover _15:26_ that is one of the contentious aspects of it. So the CFPB roles plays limits on the servicer's ability to secure force-placed insurance and these limitations include the servicer must have a reasonable basis to believe that a consumer has failed to maintain hazard insurance before actually being able charge for the insurance. Now the obvious question is what is the reasonable basis for the servicer to come to that conclusion and in order to show the servicer -- the servicer has a reasonable basis for the belief the servicer must send two notices and receive no response from the borrower with evidence of coverage.

16:09 Richard Koch

The first notice have to be send at least 45 days before you charge the consumer for the insurance and the second notice must be sent at least 30 days after the first notice, then and only then can force-placed coverage be secured 15 days after the second notice, so you're looking at a total of 60 days and by the way for servicers not only say notices must be mailed at least first _16:32_ or personally delivered, so a reasonable person may ask what happens during that 60 days if there is no coverage. If the lender exposed -- actually the servicer is allowed to place the coverage when they don't have evidence of insurance from the beginning but they can only charge for it on or after that 60-day period and in terms of a renewal, even if the borrower indicates that they are happy with that coverage on an annual basis, the service will still have to notify the customer 45 days prior to renewing the coverage and of course, another issue in the industry has been they call flat council when the borrower does provide evidence of coverage. The CFPB says that with evidence of coverage the service cancel the force-placed cover and issue the refund 15 days on receiving the evidence of coverage and refund any charges for the overlapping coverage. Also another important thing for servicers to remember that if the borrower has an escrow account the servicer must disperse the pay for the continuing coverage of the existing policy and not obtain force-placed coverage even if that requires advancing funds at escrow is short and of course if the servicer is advancing the escrow they can always recover that what is called the shortage and have the borrower repay that but those were essentially the limitation that the CFPB has an acted on the force-placed insurance.

18:07 Louis Amaya

On customer service inquiries such as payoff statements, application errors, credit reporting dispute, you know, that's always been a very tough area for a large servicer to manage effectively but I believe the CFPB addresses this and put some more rules and regulations as far as how effective the servicer is and the timelines. Would that be a correct statement?

18:37 Richard Koch

That is _18:38_ and again over the years our approach in looking at servicers. We collect a lot of data from their customer call center. We look at how quickly calls are being answered. You know traditional metrics, like average speed of answer, abandonment rate. We are looking at how quickly they answer emails, the turnaround time on emails and written correspondents and we actually track on a monthly basis, the number of incoming regulatory inquiries, the turn around time as well as litigation on a monthly basis and the cause of any particular servicer involved in litigation and what the typical types of litigation they're involved in ensue, but to answer your question the CFPB rules are providing guidance on things like payment processing and loan payoff timelines. For instance an issue of contention for a long time in the servicing industry was properly processing payments in a timely manner, the CFPB said that they must be and I'm quoting promptly credited on the day of receipt. Incomplete payments can be placed in suspense but when the amount accumulated covers a periodic payment which is the usual monthly payment of you and I and escrow if applicable have to be credited accordingly. In addition, payoff request have to be processed within seven days of a written request from the borrower. In addition, there has been some additional provisions that have been written into the new rules outlining how services respond to borrower request for information and error resolution. In general, when the servicer receives a written request from a borrower the servicer have to acknowledge the request or notice the bearer within five days, that is a pretty stringent timeline five days on the course of business, especially if you are a large servicer with a large volume of incoming inquires.

20:30 Richard Koch

Once you acknowledge that within the five days you can then got 30 to 45 days to correct the error and provide written verification to the borrower or provide written verification to the borrower that no error occurred. Additionally, especially if you're a servicer that is inheriting loans from a prior servicer, if the request for an information is unobtainable, the servicer must now provide the borrower with written verification and an explanation as to why that information is not available. The CFPB rules provide a very lengthy explanation of what constitutes an information request and what an error resolution requested and certainly far to universe to mention in the time we have but again I will encourage people to look at the rules on the CFPB website if they need a little bit more depths surrounding that but the five-day in the 30 to 45 days response time are more onerous that the previous rule which was a 20:60 rule, so services have less time now to respond the customer inquires and have to provide more information.

21:35 Louis Amaya

Just a quick site note. I guess it is applicable to all the rules, I mean, the rules are much more onerous and much more costly and this is probably a subject for another episode but the fees that the servicer is currently earning to servicing the current book of business isn't changing, so I mean that begs the question, how did that impact the margins but again that's another question to ask in another episode. Post crash delinquencies cause a lot of issues in the servicing environment primarily the inability to be staff, the technology and the way the servicers were managing the process. How does the CFPB address how servicers interact with delinquent borrowers and early intervention voice and mail contact?

22:35 Richard Koch

Yeah, what's called the early intervention rule if got the CFPB addresses those concerns and really in two major ways list. First, the servicer have to make good faith efforts to establish life contact with consumers by the 36 days of delinquency and inform them of lost mitigation options if applicable. The second, the consumer must be provided with the written information about any of available lost mitigation alternatives by the 45th day of delinquency. So essentially you got the 36 and 45-day rule and if the servicers that are listening in the 36 days is calculated from the payment due date not the late charge date, the payment due date was usually the first day of the month, also live contact that the CFPB classifies it, is to find does the telephone conversation or in person meeting, some servicer use people to go out and do what is called door knocks but essentially consist of good faith efforts to reach a consumer, telephoning them on more than one occasion or sending written or electronic communication, encouraging the borrower to the contact the servicer. The servicer does need to be aware of the requirements set forth in the borrower communication outlining the last minute options. That have to be sent by the 45th day of delinquency and essentially the statement that encourages the consumer to contact the servicer that is the theme that runs through a lot of the CFPB rules, encouraging the consumer to call in on the telephone number of the personnel assigned to the consumer euphemistically known as a single point of contact now in the industry. Services, mailing address, a statement providing examples of various lost mitigation options, repainting plans for various plan, lost mitigation.

24:19 Richard Koch

Application instructions are a statement for the borrower and how to obtain more information about the last minute options from the servicer. They also need to provide the URL for the CFPB or HUD website to get more information about home ownership counselors and any information they've been leave this wide open. Any information that the servicer determines to be helpful regarding lost mitigation options. The CFPB recommends the servicer consent what they call a generic list of last minute option that usually offer the consumers with the warning that not all consumers may qualify for the listed options.

24:56 Louis Amaya

You mentioned that the single point of contact. How exactly does that work in terms of implementation and what do we see in the industry?

25:05 Richard Koch

Well, you know interestingly CFPB defines as a continuity its context but essentially personnel must be assigned by the -- as prescribed by the yearly intervention written noticed that we would just talking about, but no later than the 45th day of delinquency. The continuity of the contact position has really established in expectation that the service is gonna be able to designate knowledgeable representatives to discuss loss mitigation actions and timeframes with the borrower and this is another running theme in the CFPB rule, they said continually quickly access records, so basically there is a lot of people who want to stay in their homes, want to save their mortgage to have somebody of a single point person designated person with the phone number that they can call who is knowledgeable and that can help some, but also has quick access to the records that they need to help the borrower and -- you know a lot of consumer groups and regulatory group have talked about the amount of time its taken for loss mitigation applications to the process and as you know servicing transfers had been long time in the industry and sometimes information isn't easily accessible, but here the CFPB is outlining these requirements that have to be knowledgeable person who has access to that information. What's a little different about the CFPB rules and what euphemistically known as a single point of contact the rule said that service is gonna sign the single purpose on multi-purpose contact. Now, the single purpose employs of a one his primarily responsibility its correspond to the delinquent borrowers. Multi-purposes employees they do not have a primarily responsibility for the delinquency and loss mitigation activities, so basically the service, so basically the service has gonna signed one designated person or really they can designate a team of people that can filled customer request for loss mitigation and then perhaps refer to someone single point of contact or a loss mitigation councilor. So, there is some flexibility -- the other provision of this that servicers have to comply with is that they have to have policies and procedures designed to provide delinquent borrowers with accurate information. Now, then on to our duty to provide loss mitigation but their policies and procedures has to outline if they are and for instance the specific loss mitigation options they tells us about submitted and completed loss mit up having it up evaluated and if denied how to appeal the decision policies and procedures are going the status of the bar submitted lost meet up, circumstances of __27:50__ and may refer a loan to foreclosure and loss mitigation deadlines are established by the loan owner sign you or CFPB. So, ultimately with the CFPB is looking for -- is a methodology that services follow. Written policies and procedures having handled loss mitigation applications with specific details regarding what they have to disclose timelines any appeal process.

28:17 Louis Amaya

What about bill tracking, I mean there's -- that's gonna big issue in the past few years with the lot of the State regulation being implemented but according to CFPB can you pursue loss mitigation options while pushing the foreclosure process along?

28:35 Richard Koch

No actually -- you know and you're right consumer groups have focused on this for a long time. Borrowers have complained that the longest referred to foreclosure and at the same time people are calling, collectors are calling of loss mitigation councilors, so they're getting contacts from all these different groups with different priorities and borrowers have argued that it has been very confusing for themselves. Basically, the new CFPB rules an act do tracking restriction as follows services cannot make the first foreclosure time whether that's judicial or non-judicial until the barrower is 120 days delinquent. There are some exception to that if the borrower provides a complete loss mitigation after and pre-foreclosure which that first 120 days services we not make the first filing unless with respect to that loss mitigation option, but denial notice has been send to the borrower and the consumer has exhausted the appeal process or the appeal process is not applicable with the consumer fail to timely request an appeal or the appeal is denied or in this case where the borrower rejects all loss mitigation options or the borrower fails to perform an agreement by the loss mitigation option, so those exceptions or exemptions allow out servicer to proceed with foreclosure within that 120 days but if those exemptions do not apply then servicer is barred from what euphemistically known as dual tracking for a period of 120 days which was one of the caveat and I know this gets a little mind numbing but if the barrowers admits a complete loss mitigation package post foreclosure filing but more than 37 days prior to a scheduled foreclosure sell the servicer under those circumstances cannot move for foreclosure judgment or order of sell or conduct for closure sell, until one of those aforementioned condition occurred with the exemption that I was talking about.

30:39 Louis Amaya

The servicers that we touch on this a little but servicers as a result of a crash to collide a heat on their inability to effectively manage the loss mitigation process either you know as a result of all these rule being putting in the place, but the CFPB regulations provide guidance to services on how to process loss mitigation application in terms of the review process, communication with the applicant, timelines for review and response, rejection, exceptions, procedure in that sort of thing.

31:10 Richard Koch

Yeah, actually the rules were pretty specific on that. Yeah, ultimately the CFPB rules introduce a single loss mitigation application approach for all services to follow. In that sense the servicer has to evaluate the borrower for all loss mitigation options but this is importantly they can take into account -- the borrowers intent. So for instance if the borrower is not interested in staying in the home and wants to pursue a short sell, the servicer can formally deny any home retention options based on the barrower intent. So, the borrower does not have to waste their time with an NPV pot it's a __31:48__ anyway, but the servicer does not have to go down the path considering different loss mitigation alternatives or applications from that point of that sort of thing. They can work with the borrower directly if the barrow has their home for sell, another words facilitating the short sell option. So, that's one option on the centralized loss mitigation approach. When a loss mitigation application is received by the servicer, the servicer has to determine if the package is complete and the application has to be reviewed and the consumer notify within 30 days. If the servicer arrives with the conclusion that the package is incomplete the borrower has to be notified within five days of the receive of that incomplete package. There is a owners to servicer to make that determination as the package is incomplete within that timeframe and they have to advise the borrower what additional document and informational require to render the application complete?

32:56 Louis Amaya

And what's more?

32:57 Richard Koch

They also have to revise the bar of the date as that the supporting documentation has to be received based on exploration of existing documentation and projected foreclosure sale and again of statement of encouraging the borrower to contact any other lean holders to arrange the loss mitigation options. So, ultimately the services are under elements to review and verify these packages within the timeframe because incomplete as to notify the barrower within 5 days and this very specific as I just mentioned without the documents and information that will take to render the file to complete. One of the thing that servicer should be aware of if you loss mitigation application is incomplete and the missing documentation as out of the borrower control, for example a credit report from the third party. The servicer has to consider that application complete within the timeframe as they have to process a file. So, they can't deny an application if they are wining for something like a credit reports or a third party and the timeframe that expired assuming that they have all the documentation in the file.

34:06 Louis Amaya

Is there anything in the CFPB that regulates capacity for loss mitigator that seems to me that would make sense to say -- you know a loss mitigator can't handle more than X number files, otherwise they're not gonna be able to process effectively __34:21__ timeline or is that -- based on the rule that is just gonna back in to a number that the servicer can have the staff to be able to meet the rules.

34:31 Richard Koch

It back ends in to the services projections for capacity.

34:36 Louis Amaya

Okay (crosstalk).

34:41 Richard Koch

(Crosstalk) what their volume is and the new staff accordingly.

34:44 Louis Amaya

So, overall how do you the impact of the CFPB regulations to the servicing industry and vendors that service to servicing industry. I mean short term, I think there is gonna be some definite pain for long term it is helpful, does it -- you know __35:07__originations, there's a small services out of the space and everything is going to make a servicers, what do you see the overall impact this?

35:15 Richard Koch

Well -- you know there is a variety of pros and cons. I think ultimately you know the situation is that when the mortgage servicing industry -- you know when the financial crisis came about could have probably done a better job of regulating themselves, of coming out of with certain standard. In absence of that -- you know the CFPB have stepped up and created this rules. It does create consistency for servicers in a lot of different areas of loan service and even though this is an industry that really has not been highly regulated in the past. There is a lot of works for them to do to come up to standard in terms of policies and procedures, compliant, technology, but they also know what they're will be accountable for in the future regarding the CFPB standards and the rules also established clear expectations for borrowers also, borrowers should know what to expect from their service or when they interacting with the servicer -- you know from what I've seen a lot of servicing company has spent plus 12 to 18 months preparing for all of these changes on an enterprise wide level. And quite a few of the servicers and knowing something regulatory consumer issues that had been out there for a number of years implemented a lot of these things -- you know in advance even the CFPB rules coming up. It's a big change for the industry, but the downside of course and you alluded to this before was in fact you know the added compliance expense for servicers and a business model that already has -- you know pretty same profit margin to start. You know, ultimately I think the cause of compliance can encourage or necessitate some services to exit the market, but their services that I know that have long health compliance expertise and they might be able to growth their sub-servicing or acquisition businesses by servicing for those -- you know other companies whether there are other lenderers or credit unions for instance that simply do not want to make deemed __37:10__ in the complaint infrastructure. So, you know with this change I think there's opportunity I think some people might fall a lot of the servicing industry while others might see there is an advantage and create opportunities around it.

37:27 Louis Amaya

We're just about out of time, last question Richard would be based on all the changes that we've been seen in the industry how does that impact when you start and how they perform their year operational risk assessments?

37:46 Richard Koch

Well, as I mentioned -- you know we have our criteria published on our website. Every servicer that we interact with gets a very extensive data questionnaire to complete. We collect those data metrics twice a year but ultimately that's not a static approach over the years the criteria, the data questionnaire has increased in size of most services or value because with all the changes and all the new rules they are always new things to look at, new things to measure, so accordingly -- we're gonna be looking in 201d as we visit our servicers. How well they prepared for the changes, how they have stepped up. You know a lot of the things I see is a lot of servicers carrying compliance and legal officers improving technology workflow to manage against all the CFPB timelines that we've talked about. So, again you know we're kind of ramping up our expectations as we look at services and certainly when we do our reports, when we publish our analysis it will take into account how servicers large and small are complying with all these new requirements.

38:54 Louis Amaya

Oh, Richard, I appreciate the time just an incredible amount of information and knowledge we discussed and we can go on days I'm sure, but I really appreciate the effort on coming on the broadcast and letting us -- giving us some background on the CFPB and allowing your expertise to be distributed. So, I appreciate it and you know we'll be talking soon I'm sure.

38:57 Richard Koch

Great. It's my pleasure, Louis. Thank you.

39:26 Louis Amaya

Lots of information there for you to digest you would -- you're gonna want to attend the five stars government form on March 25, I'm sure there will be lots of discussion there on the CFPB as well as other discussions -- mutual discussions on housing and mortgage policies, estate and housing economy. That's on March 25, 2014, please visit Mortgage Markets Today via the web LinkedIn and Twitter. The best way to listen to the broadcast is via iTunes. You can go to iTunes and search for Mortgage Markets Today and subscribe for quick and easy download and listening to your smartphone. Today's show is sponsored by iServe Company. We'll talk to you next time.