Fannie Mae recently published Fair Servicing Best Practices (“FSBP”). Developed with input from more than 30 mortgage servicers and community advocacy groups, the FSBP is intended to ensure Fannie Mae servicers are aware of the expectations that servicers will treat all borrowers fairly and consistently, and comply with the Equal Credit Opportunity Act (“ECOA”), the Fair Housing Act (“FHA”), and other consumer protection laws and regulations. In addition to links to regulatory and Fannie Mae guidance, including the Consumer Financial Protection Bureau’s advisory opinion that ECOA applies to loan servicing, the FSBP includes recommendations for:

• Training;
• Policies and procedures;
• Risk and compliance management systems;
• Monitoring and testing;
• Governance;
• Customer support, including support for limited English proficiency (“LEP”) consumers; and
• Remediation practices.

Throughout the FSBP, there is a focus on robust controls, monitoring, and testing. Servicers are encouraged to adopt the three lines of defense framework for fair servicing and to implement robust preventative and detective controls, including incorporating fair servicing concepts in quality control processes. There are several specific recommendations for monitoring and testing, including testing for disparities in:

• Loss mitigation outcomes;
• Property preservation practices;
• Fee assessments and waivers;
• Foreclosure referrals and completions;
• Loss mitigation exceptions;
• Nonsufficient funds restrictions;
• Completeness of servicing files; and
• Call handling practices.

In addition, Fannie Mae recommends evaluating complaints, deploying consumer surveys, testing the sufficiency of remediation efforts, and considering the engagement of specialized vendors to assist with fair servicing monitoring and testing. Fannie Mae highlighted using multiple communication channels, language line vendors or multilingual employees, and language action plans to assist LEP borrowers.

To summarize, Fannie Mae’s FSBP drives home the idea that fair servicing should be embedded in all aspects of a servicing organization. A robust fair servicing compliance management system starts with corporate culture. It should include all aspects of servicing by master servicers and their sub-servicers, including program, policy, and system changes.

ABOUT THE AUTHOR

Lynn Woosley is a Managing Director with Asurity Advisors. She has more than 30 years’ risk management experience in both financial services and regulatory environments. She is an expert in consumer protection, including fair lending, fair servicing, community reinvestment, and UDAAP.

Before joining Asurity, Lynn led the fair banking practice for an advisory firm. She has also held multiple leadership positions, including Senior Vice President and Fair and Responsible Banking Officer, within the Enterprise Risk Management division of a top 10 bank. Prior to joining the private sector, Lynn served as Senior Examiner and Fair Lending Advisory Economist at the Federal Reserve Bank of Atlanta. Reach her at lwoosley@asurity.com.