Suggesting that loan servicers develop and implement robust vendor management programs for foreclosure counsel would likely have surprised many servicers 24 months ago. Today, law firms, consultants and in-house servicer teams with specialized default firm audit training crisscross the country conducting extensive on-site visits of default firms, examining everything from locks on the doors and filing cabinets to sufficiency of notary policies and procedures. We have, indeed, come a long way and, while law firm vendor management continues to evolve at a break-neck speed, a few basic lessons may be drawn from the experience to date. In today’s column, we touch on five such lessons.
1. Don’t start from scratch. Particularly for small servicers, developing a default firm vendor management program from scratch may seem daunting. However, the fundamentals of the program need not vary greatly from non-legal vendor management risk management programs. A variety of government agencies have published guidance on vendor risk management that provides a solid starting point for building a program. Key documents include the following: CFPB Bulletin 2012-03 OCC 2011-29; FDIC FIL-44-2008; and OCC 2001-47.
4. Do your homework. Nothing is more frustrating and less productive than an audit that begins with the auditor asking questions like “is your state non-judicial?” or “why don’t you ask for attorneys fees in your complaints?” Basic questions should be answered in advance and seldom produce information beneficial to the overall audit. Moreover, the firm being audited will recognize that the auditor is inexperienced and/or ignorant about the applicable law and may well take the entire process less seriously.