Examiners from the Consumer Financial Protection Bureau (CFPB) found that some mortgage servicers violated federal laws while supervising for compliance, CFPB announced recently.
CFPB examiners found that some servicers failed to oversee the activities of service providers. CFPB's new mortgage servicing rules that went into effect in January 2014 specifically require servicers to have a set of policies and procedures in place to oversee the activities of service providers, who are often contracted for the purpose of developing or marketing additional products. Failure to oversee the activities of service providers who are not familiar with CFPB's rules can result in harm to the consumer.
The CFPB investigation also revealed that some servicers unfairly delayed permanent loan modifications. The examiners found that some servicers delayed the conversion process from a trial loan modification into a permanent loan modification, thus preventing the consumer from receiving all the benefits that a permanent loan modification offers.
The third violation of the mortgage servicing rules that CFPB examiners uncovered was some servicers deceived consumers about the status of their permanent loan modifications. Examiners found that some servicers failed to execute permanent loan modification agreements which had been signed and returned to them by borrowers. The servicers instead waited a period of time, then sent the borrowers updated agreements with different terms, thus affecting the borrowers' payment and, in some cases, whether or not the borrower could accept the revised modification based on financial means and budgets.
In addition to these servicer violations, CFPB examiners found that some consumer reporting agencies were not adequately tracking and resolving consumer complaints, and they found at least one debt collector that was charging consumers with illegal fees and threating litigation it had no intention of pursuing.
CFPB's issued the new mortgage servicing rules as a means of protection for struggling borrowers and for homeowners from servicing runarounds, and since then the Bureau has issued two warning bulletins to mortgage servicers regarding the servicing transfer rules.