The Loan Servicing Platform is an example of Fiserv's processing services core competency and is the first servicing system that already has the capability to manage escrow accounts for any type of loan, including home equity loans.
"This regulatory change will present challenges for many financial institutions, so it is crucial that lenders are aware that the functionality that used to be exclusive to the traditional mortgage market - such as escrow - is now required on the consumer loan side," said Cathy Martin, vice president, Consumer Loan Products, Loan Servicing Solutions, Fiserv. "When Fiserv developed its single-platform servicing strategy several years ago, we took into consideration that escrowing on non-mortgage loans might be necessary at some point."
Financial institutions offering loans qualifying as higher-priced mortgage loans will now have to have the software and infrastructure necessary to collect and administer additional escrow accounts. For some institutions, the new requirement will be the first time they have had to plan for and manage escrow transactions. According to Martin, to remain compliant, "lenders will need to know some basic escrowing procedures such as how to conduct an escrow analysis, how to prepare the initial and the annual escrow account disclosure statements, and how to keep the appropriate records for auditing and risk-mitigation purposes. Otherwise, they will face penalties."
The changes to Regulation Z will require escrow accounts for what the U.S. Department of Housing and Urban Development (HUD) defines as all "higher-priced" first-lien mortgages, based on an interest rate formula. These loans have an annual percentage rate that exceeds the average prime rate for a comparable transaction on the date the interest rate is set.