New York DFS Requires Mortgage Servicer to Retain an Independent Monitor

Mortgage Servicing

On December 5, the New York Department of Financial Services (DFS) announced that it is requiring a major mortgage servicer to retain, within 20 days, an independent monitor to conduct a comprehensive review of the firm’s servicing operations and make recommendations for improvements. The servicer is required to develop written action plans to address the monitor’s findings, subject to approval by the DFS. The DFS claims that the monitor is needed to address “preliminary evidence of non-compliance” with state regulations and an earlier agreement from the servicer to alter certain servicing practices. The prior agreement generally required the servicer to: (i) establish and maintain sufficient capacity to properly board and manage its significant portfolio of distressed loans, (ii) engage in sound document execution and retention practices to ensure that mortgage files were accurate, complete, and reliable, and (iii) implement a system of robust internal controls and oversight with respect to mortgage servicing practices performed by its staff and third-party vendors. The DFS obtained that prior agreement as a condition to approving the servicer’s acquisition of another mortgage servicing entity, due to the DFS’s “concerns regarding [the servicers’] rapid growth.”