‘Many may view these procedural flaws as trivial, technical or inconsequential, but I consider them to be part of a deeper, systemic problem and am gravely concerned,’ said Raskin in a presentation Friday before the National Consumer Law Center's Consumer Rights Litigation Conference in Boston.
Raskin, in her first public speech since she was sworn in last month, offered harsh criticism on the level of subpar work permeating the servicing sector.
"Too many accounts of shoddy operating procedures – lost paperwork, slow response times and sloppy record keeping – cast a dark shadow on this part of the industry that links mortgage borrowers and lenders," she said.
Although she acknowledged that servicing is ‘a relatively recent invention’ facing a crisis of unprecedented magnitude, she also noted that a one-size-fits-all approach to servicing cannot be used in the current environment. She was particularly upset regarding the servicers' handling of fees, which she defined as being among the recurring issues impacting the industry.
‘When a servicer does not properly carry out its primary duty of collecting and appropriately allocating mortgage payments, it can cost homeowners money and, in the most extreme cases, cause a homeowner to be pushed into premature default,’ she said. ‘Some servicers obtain unwarranted or unauthorized fees from borrowers after engaging in unfair collection practices, or through other conduct that causes borrower default, such as misapplied payments, padded costs, erroneous charges, late fees, and so on.’
Raskin also complained that ‘the inability of some servicers to maintain complete and accurate records, and to transfer servicing rights cleanly, causes additional uncertainties and vulnerabilities.’ She further challenged servicers to be more focused and professional in their business operations.
‘The complex challenges faced by the loan servicing industry right now are emblematic of the problems that emerge in any industry when incentives are fundamentally misaligned, and when the race for short-term profit overwhelms sustainable, long-term goals and practices,’ she added. ‘Responsible parties within the industry are no doubt already scrambling to fix some of the problems that have surfaced. However, because so much is riding on getting these systems right, and because consumers have such little measure of individual choice or recourse, reliance on pledges from market participants will not be enough.’
SOURCE: Federal Reserve