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CFPB Report Highlights Shoddy Servicing Practices in 2013

The Consumer Financial Protection Bureau (CFPB) released Thursday a new report detailing a number of shoddy servicing practices that “continued to plague consumers throughout 2013.”

CFPB’s latest Supervisory Highlights report covers supervision work completed between July and October 2013—after its servicing rules were first published but before they actually went into effect.

The bureau says it uncovered a number of “unfair and deceptive practices” in that time.

“Problems in mortgage servicing have plagued consumers for years and helped contribute to the financial crisis,” said CFPB Director Richard Cordray. “Taking action against mortgage servicing practices that harm consumers is a key priority for the CFPB. Especially under the detailed protections of our new rules, we expect services to clean up their act and provide responsible customer service.”

Among the findings, CFPB says its examiners found two servicers that were requiring borrowers to waive existing claims in order to get a forbearance or a loan modification agreement. According to the agency, the examiners found the waiver clauses too broad and “unfair as they were done without regard to individual circumstances.”

Examiners also reportedly found two servicers engaging in unfair practices by failing to honor existing loan modifications after a servicing transfer.

In addition, the bureau says its supervisory efforts revealed two cases of poor payment processing: one in which a servicer misrepresented payment plans in its marketing and another in which a servicer falsely told borrowers they would receive refunds from their escrow accounts.

Finally, examiners also found several cases in which servicers provided incorrect information to consumer reporting agencies by misreporting short sales as foreclosures.

In all problem cases, CFPB says the companies were alerted to the agency’s concerns, with investigations for potential enforcement actions being launched when appropriate.

In the July-October period last year, the bureau says non-public supervisory actions and self-reported violations resulted in $2.6 million in remediation to consumers.


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