CFPB: Some Servicers Were Still Screwing Up In 2013

Posted by Patrick Barnard on January 30, 2014 No Comments
Categories : Mortgage Servicing

The Consumer Financial Protection Bureau (CFPB) has issued a report showing that mortgage servicers continued to engage in sloppy and unscrupulous practices during 2013.

The CFPB says its supervision program uncovered a variety of problems during the course of the year, including unfair practices with servicing transfers, inappropriate waiving of consumer rights, poor payment processing and failing to provide correct information to consumer reporting agencies.

‘Problems in mortgage servicing have plagued consumers for years and helped contribute to the financial crisis,’ says Richard Cordray, director of the CFPB, in a press release. ‘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.’

The CFPB notes that the ‘unfair’ practices it uncovered all came before implementation of its new servicing rules that went into effect on Jan. 10.

Specifically, CFPB 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.’

Examiners also 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.’

In addition, 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.’

What's more, 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.’

The report also notes that, between July and October 2013, consumers received $2.6 million as result of overall non-public supervisory activities at the banks and non-banks the CFPB oversees.

However, the release doesn't mention how those funds were recovered and distributed, or whether they were payments or credits.

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