CFPB Plans to Closely Monitor Loan Transfer Activity from Servicers

As loans get transferred from one mortgage servicer to another, certain risks can inadvertently be placed on homeowners. So, in light of the heightened number of mortgage servicing transfers, the ""Consumer Financial Protection Bureau"":http://www.consumerfinance.gov/ (CFPB) issued a bulletin to servicers and subservicers to remind them of protections for consumers when loan transfers occur.

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The bureau noted specific concerns from transfers such as loss mitigation plans that get lost, missing paperwork, or hindrances to a consumer's chance of saving his or her home from foreclosure.

""If the transfer process is not handled properly, consumers may find that their servicer lost important loss mitigation documents or that the servicer did not credit their payments on time,"" the CFPB explained in a statement.

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While transfers can be a positive for homeowners if it means going to a specialty servicer that offers better service, initially, transfers can easily become a confusing time for borrowers since they have to deal with unfamiliar paperwork, different staff, and new addresses to send payments.

The CFPB also announced it is making servicing transfer-related problems a focus and will be scrutinizing servicers in a few specific areas.

The areas of focus are how a servicer has prepared for the transfer, how the new servicer handles files it receives through a transfer, and what policies servicers have for borrowers with loss mitigation plans in progress. Plans established with previous servicers should be honored by the new servicer; otherwise, consumers are in danger of unnecessary foreclosure as they start the process again, the bureau explained.

""Consumers should not be collateral damage in the mortgage servicing transfer process,"" said Richard Cordray, director of the CFPB, in a statement. ""This guidance directs all mortgage servicers, both banks and nonbanks, to follow the laws protecting borrowers from the risks of such transfers, and makes clear that we will be monitoring them for compliance.""

The Federal Housing Finance Agency issued a statement in support of the bureau's announcement.

""FHFA shares the goal of improving servicer performance, which will result in better outcomes for both consumers and investors,"" the agency stated.