The Consumer Financial Protection Bureau (CFPB) has made it a priority to address mortgage servicing problems through its supervision program. The report focuses on the problems uncovered in mortgage servicing, at a time when the CFPB’s new mortgage servicing rules were not yet in effect. The Bureau’s previous supervision report similarly highlighted mortgage servicing problems. Both reports make clear that mortgage servicing misconduct continued to plague consumers.
The supervisory report describes several instances where servicers violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank Act) ban on unfair, abusive or deceptive acts and practices such as:
- Unfair practices with servicing transfers: The rights to manage a loan are frequently bought and sold among servicers. Examiners found that two servicers engaged in unfair practices by failing to honor existing permanent or trial loan modifications after a servicing transfer, which resulted in borrowers being charged the wrong amount or being told to pay the wrong amount.
- Waiving consumer rights: CFPB examiners found that two servicers were requiring borrowers to waive any existing claims in order to get a forbearance or loan modification agreement. The examiners found these broad waiver clauses to be unfair as they were done without regard to individual circumstances.
- Poor payment processing: Servicers are responsible for processing loan payments and handling tax and insurance payments through escrow accounts. Examiners found that a servicer was marketing bi-weekly payment plans and misrepresenting how the plans worked. As a result, consumers did not save money the way they thought they would. Another servicer told some borrowers they would receive refunds from their escrow accounts, when in fact they would not.
- Failing to provide correct information to consumer reporting agencies: Mortgage servicers generally provide data to consumer reporting agencies. CFPB examiners found cases where servicers were misreporting short sales as foreclosures, which have a much more negative impact on a consumer’s ability to get certain types of credit.
In all cases where CFPB examiners found these mortgage servicing problems, they alerted the company to their concerns and specified necessary remedial measures. When appropriate, the CFPB opened investigations for potential enforcement actions. The CFPB has already taken enforcement action against the nation’s largest nonbank mortgage servicer, Ocwen, for its systemic misconduct at every stage of the mortgage servicing process. In December 2013, the CFPB ordered Ocwen to provide $2 billion in principal reduction to underwater borrowers and to refund $125 million to the nearly 185,000 borrowers who have already been foreclosed upon.
Control Solutions International and its forward thinking leadership have developed several services we can offer to the mortgage lending community that can be implemented both prior to and immediately after a CFPB review that will address the issues we already know the regulators are reviewing as well as the myriad of other issues they have not been as public about. We are currently engaged in several projects directly related to the CFPB and the Dodd Frank Act ranging from BSA/AML, HMDA audits, Annual Reporting (review and cleanup) and Modification/Foreclosure “look back “audits.