A recent regulatory report sheds light on “shoddy” mortgage servicing practices and calls for better supervision
The report, released by the Consumer Financial Protection Bureau, highlighted problems of “unfair and deceptive” practices in the mortgage servicing market that the bureau uncovered in 2013 through its supervision program.
“Problems in mortgage servicing have plagued consumers for years and helped contribute to the financial crisis,” said CFPB Director Richard Cordray in a statement. “Taking action against mortgage servicing practices that harm consumers is a key priority for the CFPB. Especially under the detailed protections of our new rules, we expect servicers to clean up their act and provide responsible customer service.”
Even prior to the financial crisis, the mortgage servicing industry at times was guilty of bad practices and sloppy record keeping, the CFPB said, and as millions of borrowers began falling behind on their loans due to the crisis, many servicers weren’t able to keep up with the level of service those homeowners needed.
“To address the shoddy mortgage servicing problems, the CFPB put in place new, common-sense rules designed to eliminate surprises and runarounds for homeowners,” the bureau said. The rules went into effect on January 10, 2014 and require services to maintain accurate records, give troubled borrowers direct and ongoing access to servicing personnel, credit payments made in a prompt manner, and correct errors on request.
Problems highlighted in the most recent report include unfair practices with servicing transfer related to servicers selling the rights to manage a loan to another servicer who may not honor existing permanent or trial loan modifications; requiring borrowers to waive existing claims in order to get a forbearance or loan modification agreement; poor payment processing; and failing to provide correct information to consumer reporting agencies.
In the 2013 reporting period, the CFPB’s supervisory actions and self-reported violations resulted in $2.6 million in remediation to consumers, the bureau said, noting a $2 billion enforcement action it took against Ocwen, the nation’s largest nonbank mortgage servicer and parent company of Liberty Home Equity Solutions.
Along with the release of the report, the CFPB announced it is simplifying the format of supervisory reports and anticipates the changes will reduce the amount of time between an examination and when the supervised institution receives a report.
Written by Alyssa Gerace