Regulating Mortgage Loan Servicing

Abstract

The home mortgage market has changed considerably in the past 15 years and as a result, loan servicing companies have become an important actor in the lending industry. The business function of loan servicers is to collect mortgage payments from borrowers and remit these payments to the owners of the mortgage. Borrowers have no input in deciding what company services their loan and consumer advocates have suggested that this has allowed some loan servicers to provide poor customer care or act unethically. In response, lawmakers have initiated efforts to regulate loan servicing practices. In 2007, the North Carolina General Assembly passed House Bill 1374 to regulate loan servicers operating in North Carolina. Through a literature review, content analysis of the statute, and interviews with stakeholders, I provide guidance for lawmakers who are considering similar legislation at the state and federal levels.

Keywords: Mortgage, loan servicing, countrywide, sub-prime