In our Hot Topic this week we have Shayna Arrington, Chief Compliance Officer at The Money Source Inc on the program to discuss some of the hot topics that TMS is hearing about as it relates to mortgage services that we are facing, especially as we look into 2022.
Keep in mind that the regulatory environment around COVID relief is still changing rapidly, especially at the state and the local level, meaning that there are still state legislatures and executives out there. And local governments that are putting out new guidance. What seems like daily, especially if you do business as they do in all 50 states and they are trying to keep up. And so they are constantly monitoring what’s going on at the state and local level to make sure that they are staying on top of things like foreclosure protection, housing assistance fund programs, as those go live in all 50 states, and any other relief measures around COVID that are continuing to evolve.
So you will want to tune in to make sure you are all up to date with all the compliance rules!!
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Servicing Compliance with Shayna Arrington
It’s good to have you on the show. Welcome and Happy New Year. I hope you celebrated well. Some companies are off. Some companies are working. It depended on how you handle the holiday. This show is created by mortgage professionals for mortgage professionals. We’re so grateful to have you as our reader. Our commitment is to bring you timely information that you can read anytime and anywhere. It’s January 3rd, 2022. We got some interesting things to talk about.
In the Hot Topic segment, we caught up with Shayna Arrington. She is Chief Compliance Officer at The Money Source. We’re going to have her on the show talking about things that are related to things we can anticipate in 2022. It’s so good to have you with us. Check out all the shows over at Industry Syndicate. We’re pleased to be a part of the Industry Syndicate. They do a great job of working with us on getting our show out, as well as many others.
We’re grateful to have our sponsors so thank you so much for the Mortgage Bankers Association. Also, Finastra’s Fusion Mortgagebot Solution does a great job of helping you at the point of sale and origination. They interface with so many platforms. I love their open architecture. It’s one of the things that Finastra does extremely well. Also, Lenders One. Check out Justin Demola‘s interview we did about the vision of Lenders One.
Check out The Mortgage Collaborative and Lenders One. These two coops do a great job. They do not compete with the MBA. That’s important. We got to be a member of the MBA. These are two organizations that you can be a part of. They’ll help you get to know your peers and understand what’s going on in companies similar to your size. IMB conference can do that as well but these two coops are smaller subsets and very active and I recommend them.
I want to say Insellerate is doing a great job leading in technology and mortgage expertise with pre-designed campaigns that can help you enhance borrower engagement. Also, Knowledge Coop, a wonderful learning management system, as well as Mobility MMI and Modex. Both of these companies help you connect with the right loan officers for your company. Snapdocs does a great job on the eMortgage experience, as well as SuccessKit. If you want to have your testimony told, there’s no better way to get business in the door than to get people who are telling your testimony well. That’s what SuccessKit does. They help you get your story told well.
Also, Lenders Toolkit. I love working with Brent Emler. It’s brilliant software and how they work with lenders. Check out all the services Lender Toolkit offers. Our special thank you to Rob, Les, Alice, Allen, Matt and Jack Nunnery, who’s sharing the microphone with me. We’re so glad to have you here. We’re going to move right into the Hot Topic segment.
We have in the Hot Topic segment our special guest Shayna Arrington. She is Chief Compliance Officer at The Money Source. Shayna oversees compliance across all business channels including correspondent servicing, sub-servicing and formally the company’s retail and wholesale origination channels. This includes oversight of the company’s legal and regulatory compliance, change management policies and procedures, quality control, compliance testing, licensing and examinations. She is one busy person.
Before joining TMS, Shayna worked at a mortgage banking-focused law firm where she served as an outside compliance counsel to a variety of lenders and servicers. She has extensive government and regulatory experience, including time at the Department of HUD and the Department of Justice. I’m excited to have this and share it with you during this interview. Shayna, it’s good to have you on the show.
Thanks for having me.
It’s good. I’m looking forward to it. Tell our audience a little bit about yourself so they get to know who Shayna is.
I am a recovering attorney that I’m in-house. I started my career in Washington DC working for the federal government at what I like to call the alphabet soup of government regulatory agencies in the financial services space. I worked at FINRA, FBI in their Financial Crime Section, SCC, Department of Housing and Urban Development at DOJ. When I left government service, I went into private practice and worked at a law firm within the mortgage banking space. My clients were primarily mortgage banking lenders, servicers and vendors all within the industry. Years ago, I came over to The Money Source and I’ve been in-house ever since.
It’s a great firm and we’re thrilled to have you here. As your title suggests, you got deep expertise in the area of compliance. A lot is going on in the area of mortgage servicing. What are some of the hot topics that you’re hearing about as it relates to mortgage services that we are facing, especially as we look into 2022, Shayna?
The obvious answer is loss mitigation and then navigating forbearances and post-forbearance relief in the middle of an ongoing pandemic. I hear a lot about post-pandemic servicing and I think to myself, “Post-pandemic? We’re still in the middle of it.” If that doesn’t sound like a heavy enough lift on its own, keep in mind that the regulatory environment around COVID relief is still changing rapidly, especially at the state and the local level. Meaning that there are still state legislatures and executives out there as well as local governments that are putting out new guidance that seems daily. Especially if you do business as we do in all 50 states and you’re trying to keep up, they’re trying to protect their constituents.
We’re constantly monitoring what’s going on at the state and local level to make sure that we’re staying on top of things like foreclosure protections, housing assistance fund programs if those go live in all 50 states and any other relief measures around COVID that are continuing to evolve. That’s keeping us busy. There have been some big changes at the federal level too. The CFPB’s Regulation X Amendment, which amended RESPA in light of COVID-19 concerns, went into effect on August 30th, 2022.
We’re working on the new FDCPA, Fair Debt Collection Practices Act rule. That’s been an absolute overhaul to the way that we do business as a servicer and a debt collector. A few more hot topics that I wanted to mention because I don’t think that we can talk about loan servicing without these important topics and that’s fair servicing and then language access for customers with limited English proficiency.
It’s why you got to have a sub-servicer. You got to have someone that is taking all of this seriously. TMS does a great job. The Money Source, we refer to them as TMS too. We’d tackle that. We had Rick Toma, Chief Operating Officer with you back on September 27th, 2021. We were joking about that. You do a good job. I’m impressed with the fact that you have the background that you do inside the beltway. What should we be paying more attention to? We’re hearing more about state regulators as you mentioned in your opening remarks, playing a bigger role in it. Is it viewed as a threat? I’m searching for the opportunity in all this that you talked about, Shayna.
I will be positive and I will say opportunities. We like to say at TMS, we view our auditors a little bit like a personal trainer. There are days when you don’t want to do one more pushup or squat but you do it because, at the end of the day, you’re better for it. That’s the way that we like to look at compliance and examination. Our goal is to self-audit, be self-regulatory and find things before any examiner comes in and does. That means that we have tight controls in place.
We’re always checking ourselves, making sure we’re doing things the right way, the way that we say we’re doing it. Strong change management process in place too. It is a challenge in these times when you have not only the federal government but agencies whose loans we service that is coming out with new guidance all the time. You’ve got state and local governments.
During the last administration when maybe the CFPB was a little bit quieter on enforcement actions, we saw the state step up. During COVID, there were a lot of inquiries from the state regulators wanting to make sure, first from an education standpoint, that they understood what was going on with mortgage loans and servicing in their states. From a testing perspective, wanting to make sure that we were doing what we said we were doing when it came to a commitment to help their borrowers. We have seen a lot more from the states and we will continue to, especially as the new housing assistance fund programs roll out.
There’s no question that it’s a very dynamic environment in which we find ourselves, especially when it comes to compliance. Could you expand on saying why that is?
I’m biased because I’m a compliance officer so I would say that it’s always important. Here’s what I’ll say about compliance. Let’s start with general. For most Americans, owning a home is the single most expensive purchase they’re ever going to make in their lifetime, as well as an important opportunity to create that generational wealth. That’s huge. We know that it’s important to understand the financial obligation that they’re taking on upfront at the time of loan origination but the question is, what happens afterwards? With loan origination, you’re anywhere from 30 to 60 days and your deal is done.
For most people, 30 years are left on that transaction where they could run into a myriad of issues that they need help navigating. Add a global pandemic onto that, where we have such a high volume of customers who have been impacted in one way or another. They’re trying to figure out how to recover financially in a way that allows them to stay in their home and retain their home ownership. It’s critically important as servicers that we help them and we educate them on knowing what the best options are for their unique situation and that we do it the right way.It's critically important as servicers that we help and educate them on knowing what the best options are for their unique situation and that we do it the right way. Click To Tweet
You told me that you have a lot of lenders and originators who tune into your show. If you’re out there reading as a lender, as a mortgage loan originator and you’re thinking, “Why should I care about servicing? What’s in it for me I just closed the loans,” the answer is retention. You want to keep your customers happy. Whether you’re servicing your loans, you have a sub-servicer who does it or you’re selling them off, it doesn’t matter. At the end of the day, you want to make sure that your customers are being treated well so they’ll continue to come back to you for origination services and the other services you might provide.
There are a lot of great options out there, especially on agency loans that will allow delinquent borrowers to become current again without a negative impact on credit. If it’s executed correctly, that’s huge because those customers are going to be able to put themselves back into a position where maybe they’ll be able to qualify for refinance in the future at a lower rate or even restore their financial position so that they could have an opportunity to then use that lender or originator again for a second home, an investment property or whatever it is.
For a lot of affected borrowers, there is a low-impact way out of this if and that’s a big if, they know what their options are, they’re being educated and their accounts are being handled appropriately. That’s critically important and it’s our job as servicers to make sure that that’s happening across the industry.
When you look at the regulatory landscape, is this beginning to create greater headwinds where you anticipate fewer people getting into servicing? Going to the positive side, is this creating an opportunity when it’s done right?
I’m going to split the answer and say it should go either way. You see a lot more originators out there than you do servicers. The cost to enter for origination is much lower for servicing. To start a servicing shop and build from the ground up, there is so much infrastructure that needs to be built out in terms of not just compliance, your policies and procedures, operationally, how are you going to implement these things? You have to show all that stuff to get the approvals you need. Not even to mention technology and the lift there. The cost to enter servicing is extraordinarily high. I don’t know how many new servicers we will see. What we are seeing is a lot of lenders starting to retain their servicing rights for the first time and going with a sub-servicer or private label. That’s grown particularly since the pandemic.
When you’re saying there’s not going to be as many new servicers, you’re talking about those bringing it in-house. There still will be an opportunity to service and economics suggests this is a tremendously good move but more people need to rely on a third party such as TMS or The Money Source that does such an outstanding job of staying on top of this, hence, this interview. I want to talk a little bit about the new Fair Debt Collection Practice Act. How big a change is this? What should our readers know about these new rules?
It is a huge change. I’m surprised that it’s not being talked about more in the mortgage servicing space where many of us service loans can be considered debt collectors. On the servicing side, it’s probably the biggest change we’ve seen since the RESPA mortgage servicing rules went live under the new CFPB. On the origination side, I would compare it to TRID. It is a complete overhaul.
Shayna, why is this new rule even here? What’s in it that we need to know about?
The purpose of the rule change was to modernize the regulations to align with debt collection practices. The old rule only referred to phone calls from debt collectors and letters being sent. We know that we have all sorts of communication methods. We’ve got emails, text messages, social media and all kinds of electronic communications that previously didn’t exist when the rule was written before.The purpose of the rule change was really to modernize the regulations to align with today's debt collection practices. Click To Tweet
The new rule account for that doesn’t just account for these types of communications but it contains extremely specific rules about a customer’s ability to then control those communications through a series of borrower preferences, things like nitty-gritty down to specific days, call times and even locations like, “This is convenient or this is inconvenient for you to contact me.” The deck collector needs to pick up on those things and then comply with them.
In terms of modernization, there are also rules in there for the validation of email addresses in their source before you can use them for ongoing text message consent. They launched a new database that needs to be checked for reassigned phone numbers before you send a message that could potentially disclose the debt to a third party. There are all sorts of new requirements.
They’re in plain sight if you read through it but it is lengthy. At TMS, we like to call it the FDCPA mountain that we’re climbing. I have two kids and the FDCPA might be more work, although mine are still toddlers so it’s debatable. They’re pretty hand-in-hand in terms of taking up my day, attention and resources.
When you have toddlers at home, I’m not sure there’s anything that’s a more daunting task than that. If you’re comparing the two, that gives us an insight into how daunting this one is. It’s important to look at the time that you’ve put into preparing it. Going back to the introduction, your background is so extensive. You’re well-equipped when many are going to be struggling. There are a lot of talks about fair servicing. What exactly does that mean? How are servicers should be responding?
Honestly, people in the industry are still figuring it out. When we talk about fair lending, that’s something that’s pretty well established. We all know what the rules are, how to comply and how to test them but we can’t say the same thing for fair servicing. It’s a developing concept. I remember a couple of years ago at TMS, we tried to find a vendor to audit us for fair servicing compliance. We wanted to go out and hire somebody to do it and we couldn’t find anyone who offered it as a service. It was unheard of at the time.
That’s starting to change. There are a handful of vendors that will do it but as an industry, we certainly have a long way to go. When I think of fair servicing, we started with a blank slate because we developed our fair servicing audit in-house when we couldn’t find anyone to do it. I like to think of it in the most basic that it means you’re treating your customers fairly in the servicing of their loan and that you’re not discriminating based on any type of federal or even state-prohibited basis.
In servicing, you would think about things like in loss mitigation, did you maybe unknowingly deny more black borrowers for a loss mitigation option than you did for white borrowers? Did you call your Spanish-speaking borrowers who are in delinquency with the same frequency or call times when you’re talking about how long you talk to them for that you called your English-speaking borrowers? Maybe you look at referral to foreclosure and how do you break that down by protected class?
There are all sorts of stuff that you can dig into here. I would point out that discrimination doesn’t have to be overt to be present. You can have a policy or a practice that looks consistent on its face. This is how we treat all of our borrowers but it could have an unintended disparate impact and you wouldn’t know that until you dig into the data. Just like an origination, you got to dig in and know the story that your data’s going to tell.
You touched on a couple of things such as the language. While we’re on the topic of fair servicing, what about the borrower with limited English proficiency? This has been a hot topic of CFPB but what should servicers be doing to help those types of customers with limited English proficiency?
This is one of my passion projects at TMS. I firmly believe that at the end of the day, as servicers, we are there to help our borrowers. We can’t do that if we can’t communicate with them. We have to meet our borrowers where they’re at and that includes communication methods and how they prefer to be communicated with. It also includes language preference too. If you have a borrower who needs help, most of the time it’s because they don’t understand what’s going on with their mortgage. As servicers, we have the opportunity to step in and educate them.We have to meet our borrowers where they're at and that includes communication methods and how they prefer to be communicated with. Click To Tweet
If you can’t do that in the language that they need, you need to figure out how you can get that and meet them there. I understand there are a lot of languages out there. It’s a tall order to say, “This is what we should be doing as an industry but it’s one that we need to be working on.” I don’t think it’s something that we can look at and say, “This is too complex for,” and then put it back on the shelf. We’ve got to be chipping away at it. It’s one piece of the puzzle at a time.
You also talked a little bit about the timing and when calls are made. What’s behind that?
Under Fair Debt Collection Practices Act, there are set timing requirements. I believe it’s 8:00 in the morning to 9:00 at night local time. Some states have other restrictions so I’m going to call that out. It’s not just the federal rule. You need to look at your state requirements as well. Under the FDCPA’s new rule, a borrower can designate to you that a particular time or place is convenient or inconvenient. You could be on the phone with a borrower and they could say, “I work until 6:00 every day so please don’t call me until after 6:00.”
As a servicer, we have to note that in our system. Not only does it need to be in the system but we need to stand by that. If we have automated call campaigns that are going out, we need to pull that phone number out for anything that’s going before 6:00 PM. If they say, “Don’t call me on Mondays. Don’t call me on my cell phone,” or whatever it is, we have to account for that, operationalize that and comply with what they’re telling us.
It’s getting more complicated and that’s why we have to have a sub-servicer that helps us. TMS does such a good job on that. When you’re looking at the times, is this complicated also the fact that many people are working from home? They’re home but we can’t call them during those times. I’m looking at the dynamics of this. There are significant complications in there that you’re facing.
There certainly are. We like to think of it as a challenge. With TMS, we’re always up for the challenge. There are a lot of pieces in play. When you’re looking at phone numbers, you need to look at what type of phone number. Is it mobile? Is it a work number? There might be different rules for mobile numbers under the TCPA, Telephone Consumer Protection Act. There might be different requirements for employment numbers. A lot of states have requirements around when you can and can’t call employer numbers, what times of the day and how many times a week or a month. We’ve had to program with that too not just the FDCPA requirements but the state requirements.
A lot of it comes down to technology, what systems are you on and do they have the ability to ebb and flow and change with the rules as they change or as your implementation process change. We’re lucky at TMS that we have an incredible in-house technology team. We decided on a lot of this stuff, even though we have vendors whose platforms we use to build it out in-house because we wanted it built in a way that worked for us, our business and our customers. Almost everything that we built under this rule, we custom-built in a proprietary way.
I can speak to this because I’ve been in your facilities, in the Phoenix facilities specifically. I’m so impressed with the training and the technology that you’ve put in place there. It’s no wonder that you guys are having the growth and success that you are. I want to say thank you, Shayna, so much for coming on. Is there anything that we haven’t touched on that is important for our readers to know about?
Mortgage servicing is complex. A lot of people, hopefully, your eyes haven’t glazed over yet and haven’t stopped reading. If you do it the right way, it can be engaging from a compliance perspective and a technology perspective. You want to pull your customers in, make sure you’re giving them the information that they need and serve it up in a user-friendly way. That’s what we try to do at TMS. We’ve had great success and I’m going to even say fun doing it. We look forward to continuing to share that with you and your readers in the future.
We’re glad to have you here. The culture in your company is one of those cultures I admire so much. It starts with leadership. You, Rick Toma and the rest of the team do a great job of bringing a culture where people want to come to work, look forward to it and are having fun as much as they can when it comes to working. It’s more than a job. You get a sense of that when you’re in your office because people care about what they’re doing. Kudos out to the executive team for all that they’re doing there at The Money Source. It’s great to have you here, Shayna. I appreciate you so much. Kudos to you for the work you’re doing and for staying on top of all these ever-evolving regulations. Thank you. I appreciate it.
Thank you, David.
I enjoyed that interview. Jack, she bubbled with so much energy when I was talking with her. I would love to get your commentary.
She covered a lot. The first thing I want to highlight to our readers is you take what Allen Pollack said about knowing your customer and then you look at what Shayna was talking about upping the game around client retention. You put those two together. A winning mortgage operation is diving deep within the massive amount of data that they have at the customer level and building out what its book of business looks like from a client profile. To be able to extend that through servicing with an attentive, good quality experience through the servicing process is so critical to raising our retention rates as an industry from the very low numbers that they’re at, David.
The second thing that Shayna hit on that resonated with me is the infrastructure that you have to put in place to successfully service in a compliant manner in the market. At my previous stop, we managed about a $14 billion servicing portfolio at its apex. At least in my mind, the move to outsource was the correct move.
Given all of the federal regulations and state regulations, the Army that I would’ve had to bring on to effectively manage in that type of environment and stay current and fresh like Alice was talking about earlier in the show, that some of these state regs is changing daily and how do you keep up with that? You employ people to keep up with that.
To that extent, the sub-servicer takes that on as one of the prerequisites for being in that business. The origination company oftentimes doesn’t feel the same compulsion to make that a strength. They check a box and want to do a good job at it but do they excel at it? The answer is most of them don’t, David. A sub-servicer makes a lot of sense for many companies.
Let’s move on as we wrap up the show. Jack, as you think over everything we’ve talked about on the show, starting with the markets and how they’re falling apart, seems like right at the moment continuing to see the tenure treasury climbing up, also some of the other things we talked about with COVID, any final parting thoughts on all of this?
The two things to stay aware of are the FOMC December minutes are going to hit the market. In the press conference that Chairman Powell had following the December FOMC, a lot of the phraseology turned hawkish with regard to the acceleration of the Fed easing out of the market and the propensity or likelihood to see up to three interest rate heights in 2023. The minutes will be very telling to confirm what we already believe in that hawkish move.
Unemployment numbers on Friday, the consensus is 400,000. We continue to exist in a very low unemployment market. It was 4.2% in November 2021. It’s projected to drop to 4.1% in December 2021. On the other hand, we have a very constrained labor market. Those are the two things I’m going to be keeping my eye on with regard to news out on the market and certainly on January 7th, 2022 with the Supreme Court ruling.
Lots unfold that when they meet will they cover it and make an announcement on the 9th so that we know how to navigate this one week out? It’s interesting. I just realize that.
The answer comes back to finding that middle ground. Alice talked about corporate culture. This will be very divisive to corporate culture. The work-home solution makes a lot of sense. David, I managed 2020 and the bulk of 2021. We were in a work-from-home environment. I don’t think there was a single record, whether or not it be profit or volume, that we didn’t break in 2020. We were very efficient working from a remote environment. Many of us in the industry already have that mental exercise of being able to work from home. One way to navigate through this as this case law settles out is to up the game on the work-from-home again.
Work-from-home is going to be here to stay, even more so, when you look at this kind of situation. More companies are saying, “We’re finding it’d be far more efficient.” I got another call from another bank client who says, “Our bank is requiring people to return to the office by this date.” It’s so interesting to see that date coincides with the ruling on this. They didn’t anticipate this and they’re one of these companies having to backpedal where their stance is on it. It’s going to be interesting. We’re going to be talking a lot about that in the upcoming years as we go through many of the hot topic issues. Jack, I’m so grateful that you have decided to take some of your retirement time and join me on the microphone here. You do a great job and I appreciate you so much.
It’s my pleasure. You and I have been in this industry for so long and it is a good thing when you can give back a little bit.
I appreciate you giving back and you have so much to give back, as we both do. We’re grateful to have the opportunity, audience, to be there with you. Next time, we’re going to have Julian Lumpkin from SuccessKit and he’s going to be talking about his process. It’s so important how we tell our story. There’s a great proverb I quote all the time. It says, “Let another man’s mouth praise you, not that of your own.” When we try to tell our story, we don’t do necessarily the best job. That’s why I’m excited about our partnership with SuccessKit and hearing what Julian has to say. We’ll talk to you about that.
I want to say a special thank you to our sponsors, Finastra, Lenders One, as well as Insellerate, Mobility MMI, Modex, MBA, Knowledge Coop, The Mortgage Collaborative, Snapdocs, Success Kit, as well as Lender Toolkit. It’s going to be an interesting one with the hearing that we’ve got coming up on January 2022 with the Supreme Court on the COVID vaccine mandate. Stay tuned. We’ll have lots of commentary on that. It’s great to have you with us, everybody. See you back here next time.