A government watchdog agency said Wednesday that it has uncovered issues with mortgage servicing at banks and other institutions. The agency has also opened investigations into the practices of some institutions.
In a report released Wednesday, the Consumer Financial Protection Bureau said it had uncovered numerous mortgage servicing issues at various banks and other financial institutions, although the specific institutions were not named. Among the issues highlighted by the report were sloppy account transfers, poor payment processing and loss mitigation mistakes.
“Our examinations of banks and nonbanks allow us to correct problems before more consumers are affected,” CFPB Director Richard Cordray said Wednesday. “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 report said that at banks, the CFPB had discovered overlong application review periods, disorganized and unlabeled paperwork, and deceptive communications to borrowers about the status of loan modification applications.
Many nonbank servicers, meanwhile, lacked even basic compliance management systems. Many such servicers lack formal policies and procedures for compliance and forego independent consumer compliance audits, according to the CFPB.
“The CFPB expects the companies it supervises – regardless of size – to have fully developed compliance management systems to ensure all federal consumer financial protection laws are followed,” the CFPB stated in a Wednesday news release.“A good system ensures that employees know about their responsibilities, creates structures for reviewing operations, and takes corrective actions when needed. A good system also lessens consumer risks and reduces the potential for violations.”
In some cases, the report stated, bad practices by mortgage servicers led consumers to faster foreclosure.