June 29, 2015
CFPB Mortgage Highlights
The Consumer Financial Protection Bureau issued its most recent Supervisory Highlights. The CFPB is “committed to transparency in its supervisory program by sharing key findings in order to help industry limit risks to consumers and comply with Federal consumer financial law.” (3)
There were a lot of interesting highlights relating to mortgage origination and servicing, including,
- one or more instances of failure to ensure that the HUD-1 settlement statement accurately reflects the actual settlement charges paid by the borrower.
- at least one servicer sent borrowers loss mitigation acknowledgment notices requesting documents, sometimes dozens in number, inapplicable to their circumstances and which it did not need to evaluate the borrower for loss mitigation.
- one or more servicers failed to send any loss mitigation acknowledgment notices. At least one servicer did not send notices after a loss mitigation processing platform malfunctioned repeatedly over a significant period of time. . . . the breakdown caused delays in converting trial modifications to permanent modifications, resulting in harm to borrowers, and may have caused other harm.
- At least one other servicer did not send loss mitigation acknowledgment notices to borrowers who had requested payment relief on their mortgage payments. One or more servicers treated certain requests as requests for short-term payment relief instead of requests for loss mitigation under Regulation X.
- At least one servicer sent notices of intent to foreclose to borrowers already approved for a trial modification and before the trial modification’s first payment was due without verifying whether borrowers had a pending loss mitigation plan before sending its notice. As the notice could deter borrowers from carrying out trial modifications, it likely causes substantial injury . . .
- at least one servicer sent notices warning borrowers who were current on their loans that foreclosure would be imminent. (14-18, emphasis added)
All of these highlights are interesting because they reflect the types of problems the CFPB is finding and it thus helps the industry comply with federal law. But from a public policy perspective, the CFPB’s approach is lacking. By repeating that each failure was found at “one or more” company, a reader of these Highlights cannot determine how widespread these problems are throughout the industry. And because the Highlights do not say how many borrowers were affected by each company’s failure, it is hard to say whether these problems are isolated and technical or endemic and intentional.
Future Supervisory Highlights should include more information about the number of institutions and the number of consumers who were affected by these violations.
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