The AG settlement was signed by the nation’s five largest mortgage servicers in an agreement forged with the Justice Department, the Department of Housing and Urban Development (HUD) and state attorneys general from 49 states on one side. Yet it was clear from the beginning that the stipulations outlined within would impact the entire industry.

With such a seismic shift in the regula-tory landscape of the industry, there was bound to be a period of adjustment. For much of 2012, that is exactly what we saw taking place: good faith efforts to accommodate and innovate in response to a wide range of new standards, accom-panied by a great deal of head-scratching and strategizing about not only how best to implement the new standards, but how to interpret them.

Fortunately, even though the months after the settlement was finalized were characterized by a general sense of uncertainty (and a scramble to cover bases and apply specific solutions to vague remedies), the industry has sub-sequently made some real progress in moving toward a greater understanding of the new standards.

A big step forward in that regard was the rollout of the national mortgage servicing standards—the more than 300 distinct servicing standards and policies that flesh out the broad principles set forth in the original settlement in a more practical and precise way. The new

Consumer Financial Protection Bureau (CFPB), the federal agency responsible for overseeing and implementing the AG settlement, has also taken on a more active and assertive role in providing implementation guidance.

In fact, many of the prominent remedies outlined in the AG settlement have already been implemented—from single points of contact, to the elimination of dual tracking, to the implementation of look-back reviews that were offered to all consumers who wished to have their foreclosures reviewed for propriety.

While we have made a great deal of progress, the process of interpretation and clarification promises to be a long one.

More recent developments, such as the Homeowner Bill of Rights in California, raise difficult questions about jurisdic-tion, consistency and clarity. Today, while questions (and challenges) remain, it is noteworthy that the kinds of questions that industry professionals are asking have changed. It is a sign of the prog-ress that we have made that the focus has shifted from the immediate priority of how to adopt and adapt, to the more long-term structural issues that have

been introduced or exacerbated by these new standards.

For example: How can servicers and servicing vendors satisfy these new requirements and service their clients efficiently with an outdated fixed-fee pay structure that does not account for the requisite infrastructure upgrades, compliance and oversight requirements, and process and personnel changes?

While some concrete ideas have been suggested (such as paying servicers based on the severity of the delinquen-cies that they are servicing and not based solely on a percentage of the amount collected), the importance of coming up with lasting solutions based on the new industry dynamics and cost structure will need to be a big part of the conversation going forward.

Overall, the industry’s response to the AG settlement has been admirable. In many cases, frustrations and inefficien-cies have been introduced because of overcompliance rather than the failure to move quickly enough.

Today, a year after it was first filed, there is much less gray area regarding the standards. The industry has gone from asking, “What do we do next?” to stating, “We know what to do—let’s figure out how to get it done in a constructive and consistent way.” This is a shift that represents real and measurable progress.

Scott Goldstein is president and chief executive officer of Farmington Hills, Michigan-based NDeX, a leading provider of technology and processing services for law firms nationwide. Goldstein current-ly serves on the Federal Reserve Bank of Chicago Advisory Council. He can be reached at sgoldstein@ndexteam.com.

The AG Settlement Settles In

W hen the Attorneys General (AG) settlement was officially filed in March last year, it was clear that the landmark $25 billion agreement would have a profound impact on the

mortgage servicing industry. What was less clear, in the aftermath of the filing, was how the obligations outlined in the agreement would play out.

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by SCOT T GOLDSTEIN

Overall, the industry’s response to the AG settlement has been admirable.