Mortgage servicers got a bad name during the subprime mortgage crisis, but despite that reputation damage, and despite new laws designed to get them on the straight and narrow, they’re still up to their tricks, the Consumer Financial Protection Bureau has found.
Between January and April, many servicers violated Regulation X, which spells out requirements for soliciting, completing and evaluating loss mitigation applications.
Infractions included burying borrowers in paperwork. At least one servicer sent borrowers loss acknowledgment notices requesting lots of unnecessary documents that were not applicable to their circumstances, for instance. Another violation was requesting documents borrowers previously had submitted.
Some servicers didn’t send any loss mitigation acknowledgment notices after a loss mitigation processing platform malfunctioned repeatedly. This delayed the conversion of trial modifications to permanent ones, hurting borrowers.
Others treated certain requests as pertaining to short-term payment relief instead of requests for loss mitigation under Regulation X.
Still others misled borrowers about how deferred mortgages worked.
In other cases, servicers didn’t send any loss mitigation acknowledgment notices.
The Bureau’s Role in Crime and Punishment
Overall, the bureau’s efforts across all industries got more than 80,000 consumers a total of US$11.6 million in remediation.
“Where the CFPB finds violations in the course of an examination, it considers many factors in determining whether or not to pursue an enforcement action,” bureau spokesperson Sam Gilford told CRM Buyer.
These include the types of violations, the magnitude of consumer harm, the institution’s willingness to take corrective or remedial action, the effectiveness of the institution’s compliance management systems, and whether the institution is a repeat offender.
The Evil That Mortgage Servicers Do
“Over the years, mortgage lenders or servicers have been doing very bad things to consumers,” said Linda Sherry, national priorities director at Consumer Action.
Those things include discriminating against borrowers, denying people on public assistance loans, and using special techniques on immigrants and people of color to discourage them from applying for mortgages for which they were qualified, Sherry told CRM Buyer.
The CFPB last fall reported that for the period between 2011 and 2014, it had received nearly 29,400 complaints against Bank of America for mortgage-related grievances — loan servicing, foreclosures and related issues — making it the most complained-about servicer in the category.
Wells Fargo was the runner-up with about 17,600.
In third place, with 13,500 complaints logged against it, was Ocwen, which was under investigation for issuing backdated letters to borrowers who sought loan modifications.
The Good That CFPB Does
The CFPB earlier this year made NewDay Financial pay $2 million in civil penalties for deceptive mortgage advertising and kickbacks.
Green Tree Servicing this spring had to pay $48 million in borrower restitution and $15 million in fines levied by the CFPB and the U.S. Federal Trade Commission. Its violations included mistreating mortgage borrowers trying to prevent foreclosure on their homes.
The bureau earlier this month filed a complaint in federal district court against RPM Mortgage and its CEO, Erwin Robert Hirt, for illegally paying loan originators bonuses and higher commissions to steer consumers into costlier mortgages.
“All told, [the CFPB] is doing all they can, and they’re doing a good job about it,” Consumer Action’s Sherry said.
Illegal or deceptive behavior by mortgage services “has been a serious pain point for consumers,” she noted. “Everything they do faces tremendous pushback from the industry, and Republican lawmakers have filed bills in Congress seeking to strangle them.”
The bureau had planned to launch a tool that would let consumers look up and compare mortgages, but industry pressure has forced it to hold off on the launch, Sherry said, adding, “I’m hopeful they’ll get it up and running.”
Based on the objective measurements and audits performed by the Office of Mortgage Settlement Oversight (which has responsibility for monitoring and enforcing the $50 billion settlement agreed to by the largest servicers), this story seems biased. Here is the latest report from the court appointed settlement monitor, Joseph A. Smith, which shows the servicers (including Green Tree) are performing in accordance with terms of the settlement and its over 30 metrics.