A new report from the Consumer Financial Protection Bureau outlines mortgage servicing problems found at banks and nonbank institutions, highlighting issues relating to “sloppy” account transfers and poor payment processing, among others.
“Our examinations of banks and nonbanks allow us to correct problems before more consumers are affected,” CFPB Director Richard Cordray said Wednesday in a statement. “Today’s report highlights both the mortgage servicing problems throughout the industry and the challenges of making sure that nonbanks are following federal law. Fixing both is a priority for us.”
The Dodd-Frank Act gives the CFPB authority to supervise depository institutions and credit unions with total assets of more than $10 billion, along with their affiliates. The bureau is also authorized to supervise nonbanks regardless of their size in certain markets, including mortgage companies encompassing originators, brokers, and servicers.
Much of the CFPB’s supervisory reports to date have been focused on mortgage servicing, with examiners uncovering issues the bureau says can be harmful to consumers, including “sloppy” account transfers, poor payment processing, and loss mitigation mistakes.
The account transfer issues for mortgage loan servicing include disorganized and unlabeled paperwork and failures by mortgage servicers to tell consumers when the servicing is transferred to another company.
For cases where the CFPB identified mortgage servicing problems, examiners alerted companies to concerns and specified necessary remedial measures. When appropriate, the bureau’s examiners opened investigations for potential enforcement actions.
Servicers are also directed to take specific corrective actions depending on any identified issues, such as conducting periodic testing to monitor areas of concern and providing reports to the CFPB on their progress in completing those corrective actions.
As for nonbanks, the report found many such institutions are missing a comprehensive consumer compliance program, lacking formal policies and procedures, and are forgoing independent consumer compliance audits.
“The CFPB is committed to helping industry establish good compliance systems and today’s report also offers guidance in how to do so,” the CFPB said. “In general, both banks and nonbanks have committed to improving their compliance management systems in the future.”
Written by Alyssa Gerace