Conflicted Out: When Must a Servicer Follow FHA Guidelines over the Global Foreclosure Settlement Servicing Standards?

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Conflicted Out: When Must a Servicer Follow FHA Guidelines over the Global Foreclosure Settlement Servicing Standards?

Conflicted Out: When Must a Servicer Follow FHA Guidelines over the Global Foreclosure Settlement Servicing Standards?

NOTE: K&L is a lobbying firm 🙂

K & L GATES-

The National Servicing Standards, outlined in the March 2012 Global Foreclosure Settlement, are difficult to reconcile with the already stringent servicing requirements in place for the Federal Housing Administration’s (“FHA”) single family loan insurance program. The National Servicing Standards are expressly subject to and must be interpreted in accordance with applicable federal, state and local laws, rules and regulations, and the terms and provisions of the requirements, binding directives and investor guidelines of the mortgage insurer, including FHA. In the event of a conflict between such requirements and the National Servicing Standards such that a servicer cannot comply with the National Servicing Standards without violating these requirements or being subject to adverse action, then the servicer must document such conflicts and notify the monitoring committee that the servicer intends to comply with the FHA requirements to the extent necessary to eliminate the conflict.

It is not clear, however, that merely following FHA’s requirements will be sufficient to comply with the National Servicing Standards, and attempting to follow both the National Servicing Standards and the FHA requirements can be a difficult, and sometimes impossible, balancing act for a loan servicer absent specific guidance from the Department of Housing and Urban Development (“HUD”) and the committee responsible for monitoring compliance with the National Servicing Standards. HUD was an active participant in the negotiations surrounding the National Servicing Standards and clarification from the agency on how the National Servicing Standards will fit into the FHA servicing framework will be necessary going forward.

Below, we summarize some of the more difficult to reconcile requirements in the National Servicing Standards and how they may conflict with current FHA guidelines.

[K & L GATES via Consumer Protection Services Watch]

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