Error-prone and even abusive practices still plague the mortgage servicing business, according to a new report from the Consumer Financial Protection Bureau (CFPB). The report indicates that servicers have made a variety of mistakes, including sloppy payment processing, poor communications with consumers, and insufficient programs to ensure compliance with federal laws. Under the 2010 Dodd-Frank law, the CFPB is tasked with oversight of consumer products, including mortgages and credit cards, due to issues that stemmed from the 2007-2009 financial crisis.
Making sense of the story
- The CFPB has launched investigations into the conduct of banks and other financial firms since many companies continue to violate the terms of the 2012 National Mortgage Settlement.
- In some instances, homeowners faced extra fees due to the sloppy payment processing of mortgage servicers. Also, some homeowners were not notified that their loans were transferred to another company.
- Non-bank servicing firms, which are now subject to examinations, reportedly lack formal procedures to address consumer complaints or ensure quality control. The report shows an absence of systems for compliance management.
- “Deceptive communications to borrowers” about modification requests remains an issue, and services failed to help struggling homeowners find more manageable repayment plans where possible. Applications for loan modifications also took too long to process.
- New mortgage servicing standards are set to take effect in January 2014 to force servicers to give homeowners easy access to information about their loans, among other things. The CFPB issued the new standards to promote greater transparency.