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Will Vendors Create New Liability for Servicers?

Mortgage Banking Magazine

Jonice Gray Tucker

The historic $26 billion federal-state settlement with the five largest mortgage servicers is the latest evidence that we are facing a sea change in the loan servicing industry - a change that was already under way when the financial crisis hit in 2008. It is becoming appararent that this reform effort will encompass not only servicers, but their vendors as well, and the future of servicer-vendor relationships.

The use of outside vendors by loan servicers is not new, but their role in default servicing, and the adequancy of their work, has drawn increasing regulatory scrutiny during the mortgage crisis. The quality of services delivered by venfors has received unprecedented attention during the last 18 months, and the work of vendors has been the subject of enforcement actions at both the state and federal levels.

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