United States

CFPB report details mortgage servicing problems

COMPLIANCE NEWS  | 

After a four-month supervision period last year in which the Consumer Finance Protection Bureau (CFPB or Bureau) took a close look at mortgage servicing practices, the Bureau issued a report that identifies multiple instances where servicers violated the Wall Street Reform and Consumer Protection Act’s (Dodd-Frank Act) ban on abusive, deceptive or unfair acts or practices. These instances include the following:

Unfair practices with servicing transfers: In this area, examiners found unfair practices with borrowers being charged the wrong amount or being told to pay the wrong amount as a result of two servicers failing to honor existing permanent or trial loan modifications after a servicing transfer.

Waiving consumer rights: CFPB examiners found two servicers that had required borrowers to waive any existing claims in order to get a forbearance or loan modification agreement. These broad waiver clauses were deemed unfair because they were applied without regard to individual circumstances.

Poor payment processing: The Bureau found one servicer that marketed biweekly payment plans had misrepresented how the plans worked. Examiners also found another servicer that had falsely claimed that some borrowers would receive refunds from their escrow accounts.

Providing incorrect information to reporting agencies: The Bureau found cases where servicers had misreported short sales as foreclosures, which can have a much more damaging effect on a consumer’s ability to get certain types of credit.

In all cases where examiners found servicing problems, they alerted the lender and specified necessary remedial measures. When appropriate, the CFPB opened investigations for potential enforcement actions. During this four-month reporting period, consumers received $2.6 million in remediation as a result of the CFPB’s nonpublic supervisory actions or self-reported violations by bank or nonbank lenders.

To address these mortgage servicing issues, the CFPB established a series of new, common-sense rules that went into effect on Jan. 10, 2014. These rules require servicers to maintain accurate records, provide troubled borrowers with direct and ongoing access to servicing personnel, deliver prompt payment credits and correct errors upon request.

The Bureau’s complete mortgage servicing report is available at http://www.consumerfinance.gov/newsroom/cfpb-supervision-report-highlights-mortgage-servicing-problems-in-2013/


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Kelly Housh
Regulatory Compliance National Support
Minneapolis, MN
612.376.9375

 

Ty Beasley
Regulatory Compliance National Leader
Dallas, TX
972.764.7100