Servicing


we do meets TCF and MCOB,” says Cattell. “We also believe that it is our responsibility as a servicer to ensure that our lenders are aware of everything they need to know regarding changes in the marketplace – why would someone employ a servicer and have to do the work themselves?”


RelationShipS


The question is important because of the changing shape of the market. Where in the past originating lenders and regulated financial institutions held the bulk of residential mortgages, more and more unregulated firms, including hedge funds and private equity houses, are buying mortgage books at discounts and holding onto them. It then becomes that firm’s responsibility to service the loans. But if the owner of the book is unregulated and the servicer is regulated, where then does responsibility for TCF lie?


A spokeswoman for the FSA says that as regards customers in arrears and TCF: “We say on page 56 of CP 10/16 Mortgage Market Review: Responsible Lending ‘In some fee justifications we reviewed, the administration of mortgage arrears had been outsourced to a TPA. AS we indicated in DP/3, we are undertaking a review of our approach to TPA’s. This review is not yet complete. For this reason, we are not commenting in this CP on the recovery of TPA costs as parts of our arrears charges or TPA arrears charging practices more generally. This will form part of our wider conclusions and proposals on TPA’s, which will be published at a later date.’” In a lender servicer relationship, the contract stipulates that the lender is always responsible for regulated activity and that any outsourced activity can delegate the practical day-to-day machinations of arrears handling for example, but not the responsibility.


Jane Manning is the compliance 32 mortgage introDucer AUGUST 2010


manager at Crown Mortgage Management and says Treating Customers Fairly is the responsibility of every regulated firm and that we should all be striving to achieve the six TCF outcomes where appropriate. “Obviously there are some outcomes that a servicer can’t influence,” she says. “For example, product design - which is clearly the responsibility of the product provider - but both the lender and servicer have a responsibility to treat customers fairly throughout the life of the loan. At Crown we have always followed the FSA view that servicers should act as ‘responsible mortgage lender’ which includes Treating Customers Fairly.” Frazer is of a similar view. “When we


were Capstone we always took TCF responsibilities very seriously and that will carry through to Acenden and when we take on new clients. We want to be more than TCF compliant.” “Some of our lenders are not regulated


and Crown takes full responsibility for ensuring that these loans are administered within TCF guidelines,” adds Cattel. “In view of the perception that some of the lenders that are purchasing distressed mortgage assets are looking to recover their


investment at all costs, it is even more critical that our policies and processes ensure that borrowers with these mortgages are no worse off than they would be with a prime lender.” is also concerned that any regulation does not discourage unregulated firms from purchasing mortgage assets. “What we don’t want to see is any


restrictions on who can or can’t purchase mortgage assets,” she says. “Any restrictions would just stifle an already flagging market which is not good business for anyone.”


The Mortgage Market Review is attempting to deal with just this issue. In the instance that the owner of a mortgage book is not FSA regulated but the servicer is regulated, the current legal position is a grey area in terms of who’s responsible. Currently neither party is legally regulated because the servicer contractually doesn’t take responsibility, but the owner isn’t regulated at all. The FSA is aware of the problem this causes and the fact that responsibility could fall between the cracks. The MMR has plans to cover that gap in the section on managing a mortgage contract, and those in the servicing industry suspect it will be resolved by the end of this year. As is always the case, the devil will be in the detail. n


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