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Transferring Default Servicing Information

Question:

What information needs to be included when transferring default servicing information from one servicer to another?

Answer:

Transferring information on defaulted loans, especially loans impacted by COVID, should include all documents received on performing loans as well as the following:

• loss mitigation status, 
• any documentation submitted and/or requests for a forbearance or modification, 
• and a record of the loan servicing notes related to the request.

The CFPB has issued a directive stating that all relevant documents must be transferred to the new subservicer. However, the CFPB has also stated that the transferee’s responsibility is as much as the transferor’s responsibility. Therefore, the servicers should work together to develop additional controls in the transfer process, defining timeframes and including a robust escalation process for missing critical documents.

As a best practice, this process should support and reflect accountability and ownership on the servicer’s behalf with regard to efforts on obtaining critical documents and/or critical data points that may be missing. It should reflect a set number of attempts, define how those attempts are made, such as escalation via email and then phone, and define escalation roles (from the representative to the supervisor to the manager/VP, etc.). Servicers should consider including the process for this issue in the transfer agreement and any recourse that may be taken for missing critical information, such as denying the loan transfer and/or repurchasing of impacted loans.