Bureau examiners found that some servicers charged unfair late fees and harassed consumers with debt collection calls. The CFPB also found that some mortgage servicers failed to provide critical consumer protections required by the new CFPB servicing rules that took effect earlier this year.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the CFPB has authority to supervise banks with over $10 billion in assets and certain nonbanks. Those nonbanks include mortgage companies, private student loan lenders and payday lenders, as well as nonbanks the Bureau defines through rulemaking as “larger participants.”
According to CFPB, the report aims to share information that industry participants can use to ensure their operations remain in compliance with federal consumer financial law. “All borrowers should be treated fairly by loan servicers, and through our supervision program, we intend to hold them accountable for how they treat borrowers,” said CFPB Director Richard Cordray.
Below are some of CFPB’s mortgage servicing findings from the report:
- Failed to oversee service providers: Institutions in contract with service providers failed to provide policies and procedures that oversee the providers. “When institutions do not oversee their activities, service providers that are unfamiliar with consumer financial protection laws can harm consumers,” the CFPB said.
- Unfairly delayed permanent loan modifications: Servicers delayed the loan modification process, causing “harm because they [borrowers] did not promptly receive the benefits of the terms of the permanent modification.”
- Deceived consumers about status of permanent loan modifications: Examiners found that “one or more servicers” did not execute certain permanent modification agreements after borrowers had signed them. Instead, the servicers sent borrowers updated agreements with different terms.
The CFPB said they alerted the accused companies to their concerns and outlined necessary remedial measures. The regulator did not name the firms allegedly involved in the illegal activity.
Click here to view the complete report, which includes student loan servicing findings.
The Consumer Financial Protection Bureau (CFPB) issued a report Tuesday that alleges mortgage and student loan servicers are engaged in a bevy of illegal practices.