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Report: Small, Midsize Servicers to Lose Most Under New Rules

The ""Consumer Financial Protection Bureau"":http://www.consumerfinance.gov/ strikes once more ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô against the little guy, reports suggest.

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One of those came from ""Moody's Investors Service"":http://www.moodys.com/ on Thursday. The ratings agency released a report that linked a tide of new rules from the credit bureau to ""costly"" and ""challenging"" new costs for small to midsize servicers.

According to Moody's, these servicers will likely encounter ""significant hurdles"" in moves to adopt the single point of contact strategy.

Analysts William Fricke, Gene Berman, and Linda Stesney offered this much: ""Many small servicers will find the cost of implementing the rules prohibitive, because the rules require them to change borrower notices, implement new contact strategies, update compliance procedures and make core system changes.""

As for the bigger guys? The report says they may just walk away without much of a scratch.

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According to the analysts, the new servicing regime would exert only ""minimal impact"" on large servicers, especially as federal consent orders from 2011 take effect with the historic $25 billion landmark settlement from earlier this year.

A few changes may come down the pipeline for these servicers. Changes to billing statements, adjustment notices for adjustable-rate mortgages, and evaluations for forced-placed insurance policies, for example. But none of the changes will likely near the problems of cost for small to midsize servicers.

And the result? ""The cost pressure would be another factor supporting the ongoing consolidation in the mortgage servicing industry as well as the increase in the transfer of servicing to specialty servicers that are more equipped to handle loans in a ├â┬ó├óÔÇÜ┬¼├ï┼ôhigh-touch' fashion,"" according to Fricke, Berman, and Stesney.

Analysts with fellow ratings agency ""Fitch Ratings"":http://www.fitchratings.com/web/en/dynamic/fitch-home.jsp would probably concur. A report from Fitch first ""forecasted"":https://themreport.com/articles/fitch-servicers-will-feel-burn-from-cfpb-rules-2012-04-16 ""increased operational, compliance, and reporting expenses"" for servicers in April.

The CFPB stands firm behind the decision to roll out proposals for new servicing rules. Bureau chief Richard Cordray said in a statement last week that the ""rules would offer consumers basic protections and put the ├â┬ó├óÔÇÜ┬¼├ï┼ôservice' back into mortgage servicing.""

The bureau certainly has company. In an ""earlier interview"":http://www.dsnews.com/articles/behind-25b-settlement-joe-smith-2012-04-24 with _DS News_, our sister publication, settlement monitor Joseph A. Smith, Jr., said that he felt the nation would ""ultimately"" move forward with national servicing standards ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô ""and we ought to.""

Do you think these predictions are as dire as analysts make them out to be? Sound off by writing us at [email protected] for a chance to appear in our monthly magazine.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.
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