The CFPB issued a report on Wednesday that found mortgage servicing problems at banks and nonbanks, and that many nonbank institutions lack robust internal compliance controls.
Mortgage servicers were found to have engaged in “sloppy account transfers,” which were the result of unlabeled or disorganized paperwork, failure on behalf of mortgage servicers to tell consumers that loan servicing had been transferred and a lack of document-handling protocols.
The report also found that while servicers are responsible for processing loan payments and handling tax and insurance payments, servicers provided inadequate notice to borrowers of a change in address to send payments, leading to late payments. It also found that servicers had excessive delays in handling cancellations of private insurance payments and that property taxes were being paid later than expected.
Additionally, the CFPB found that servicers made loss mitigation mistakes as a result of inconsistent communication with borrowers, inconsistent loss mitigation underwriting, long application review periods, incomplete loan files and deceptive communications to borrowers about the status of loan modification applications.
In its examination of nonbank entities, the CFPB found that many lacked a comprehensive consumer compliance program, formal policies and procedures and that many opted away from independent consumer compliance audits.
The CFPB notified companies of its concerns, specified remedial measures and, when appropriate, opened investigations for potential enforcement actions.
“Our examinations of banks and nonbanks allow us to correct problems before more consumers are affected,” CFPB Director Richard Cordray said. “Today’s report highlights both the mortgage servicing problems throughout the industry and the challenges of making sure that nonbanks are following federal law. Fixing both is a priority for us.”