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MORTGAGEBANKERSASSOCIATION

MBA's Regulatory Compliance Conference 2011

THIRDPARTYOUTREACHPROVIDERS

September 27, 2011

Washington, DC

JAMES A. BRODSKY

Weiner Brodsky Sidman Kider PC


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INS AND OUTS OF THIRD PARTY OUTREACH PROVIDERS

MBA'S REGULATORY COMPLIANCE CONFERENCE 2011

Question:What Are Third Party Outreach Providers?

Answer: Companies That Provide In Person Defaulted

Borrower Contact

Independent Contractors (Third Parties) That: Contact Borrowers, In Distress or In Default

Contact Borrowers, In Person

Do NOT Collect Payments From Borrowers

Are Paid Only By The Servicer or Investors That HireThem


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Unprecedented scrutiny/increased regulation of

mortgage servicing industry and, as a result, of their

third party outreach providers as well

Consequences: Servicers should assure that suchthird party outreach providers are in compliance

with such regulatory requirements

Comply with FDCPA and state laws

Maintain necessary debt collector licenses

Monitor changes in regulatory landscape

The Point:

Key Requirements:


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Increasing Regulatory Scrutiny

CFPB:

Evidence of shoddy practices and underinvestment

is striking

Call for increased supervision of servicers

Fannie Mae: Quality Right Party Contact

HUD: Face-to-face Interview Requirements

Takeaway: More high touch contact requirementsleading to increased use of third party outreach

providers


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Third party outreach providers must be incompliance

House of Representatives: Bill on Qualified

Independent Third Parties

OCC: Bank of America Consent Order

Assure that third party service providers and

independent contractors are in compliance with all

applicable requirements


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Compliance - FDCPA

FTC: Third Party Outreach Providers as Debt

Collectors under theFDCPA

CFPB: Likely to take similar view

Sample Requirements

Self-Identification

Mini-Miranda Warning

Limits on time and place of communications

Violations: Up to $500,000 or 1% of net worth


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Compliance FDCPA (contd)

Servicer Repercussions

Reputational Risk

Potential Dodd-Frank Liability

Other Concerns

Information sharing

Subcontracting



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Compliance States

Most states impose requirements on third partyoutreach providers

Example: Massachusetts

License by Commissioner of Banks required

Debt Collection requirements similar to FDCPA

Requirements on servicers that third party outreachproviders comply with Massachusetts and federal law

Potential suspension or revocation of servicing license forviolation of requirements



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Compliance States (contd)

Example: Texas

Restrictions on various debt collection practices

Use of threats or coercion

Oppressing, harassing, or abusing borrowers

Attempting to collect interest, charge or feeincidental to an obligation

Use of fraudulent, deceptive, or misleadingmisrepresentations

Direct liability for servicers if they have actualknowledge of violation of Texas law by independentdebt collectors



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Growing Role of State Attorneys-General

CFPB memorandum of understanding to

share oversight of servicers with state

financial regulators



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Growing Role of State Attorneys-General(contd)

Increased power under Dodd-Frank

Authority to bring civil actions in federal orstate court to enforce Title X requirements

and regulations against servicers authorized

to do business in their states

CFPB free to intervene and remove to federal

court



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What Should Servicers Do?

Only hire third party outreach providers that:

Are compliant with all applicable federal and state laws

Maintain all necessary licenses

Train and supervise their staff

Do not subcontract to non-compliant, unlicensed, oruntrained entities



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MORTGAGEBANKERSASSOCIATION

MBA's Regulatory Compliance Conference 2011

THIRDPARTYOUTREACHPROVIDERS

JAMES A. BRODSKY

[email protected]

Weiner Brodsky SidmanKider PCWashington, DC Dallas, TX Newport Beach, CA

202-628-2000

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