WASHINGTON — Treasury Secretary Tim Geithner supported calls for a national servicing standard on Thursday, adding his voice to other regulators who have promoted the idea.
At a Troubled Asset Relief Program Congressional Oversight Panel hearing, Geithner responded to a question by New York Banking Superintendent Richard Neiman on the issue.
"Do we need national standards for mortgage loan servicers?" Neiman asked.
"I think we do," Geithner replied.
Earlier this week, Neiman, a member of COP, suggested that the Consumer Financial Protection Bureau write national servicing standards. He continued that push at the hearing.
"I believe Dodd-Frank's vision of effective CFPB regulation must be realized in the foreclosure area. In order to protect homeowners and promote future financial stability, the CFPB has been empowered to write mortgage lending rules," Neiman said. "It must set prudent baseline regulations for mortgage servicers. To date no such federal regulations exist."
Neiman suggested that a national mortgage servicing standard use New York as a model. In 2009, New York passed legislation that required servicers to register with the state. In 2010, the state followed up with business contact regulations. Those rules went into effect in the fall.
They require servicers to establish an explicit duty of care, consider a modification prior to foreclosure, and report mortgage performance data on delinquencies.
"I'm not familiar in detail with what you've done in New York, although I know a number of people feel — you know, think very highly of item," Geithner said. "But we'll look at that model and others, but I think you're making the right point."
Neiman suggested that the CFPB look into the issue. Geithner said the administration is looking at underwriting standards but wants to make sure it is doing everything it can to have a durable set of fixes. But he added caution.
"I can't be honest with you and tell you whether it's something where we'll have a proposal in six months or 12 months. Just can't tell you," Geithner said. "But it's absolutely very important. And, again, we'll look to the model in New York and other states to see what's the best way to proceed."
The calls for a national standard come amid servicer differences for loan modifications and foreclosures. Regulators and state attorneys general are in the process of reviewing servicer procedures.
The issue was first raised at a Dec. 1 Senate hearing, where Federal Reserve Board Gov. Dan Tarullo said "it seems reasonable at least to consider whether a national set of standards for mortgage servicers may be warranted."
Other regulators have supported such a standard. In an interview with American Banker on Tuesday, COP Chairman Sen. Ted Kaufman also suggested a national standard.
"The problem is it didn't turn out as simple as Treasury thought and now servicers are in the middle of conflicts of interest. … Clearly some kind of regulations should be developed, some way to eliminate conflict of interest," Kaufman said.
