Affiliated Vendors Are Popular Targets For Regulators

Affiliated Vendors Are Popular Targets For Regulators

Jul 28, 2014


Co-Author, Law360, July 28, 2014

Companies or lawyers who work in the foreclosure industry beware: The use of affiliated vendors is under attack.  Government regulators are increasingly targeting mortgage servicers, and notably their outside law firms, with consumer protection allegations regarding the use of affiliated companies for foreclosure-related services. Often, the allegations center on the theory that the use of affiliates eliminates the typical market forces and checks and balances inherent in procuring foreclosure-related services through arms-length transactions. The regulators argue that the lack of competition allows the affiliates to charge fees for those services that are at or near the maximum allowable rate. As New York’s top banking regulator put it, “[A]ffiliated companies have every incentive to provide low-quality services for high fees, and they appear in some cases to be doing so.” This, say regulators, results in supracompetitive profits for mortgage servicers and their outside law firms and higher foreclosure-related costs for homeowners.

Click on the above pdf to read the entire article published in Law360 on July 28, 2014.

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