Housing Market, Oversight, Regulation

CFPB supervision report uncovers unfair, deceptive practices by mortgage servicers

MortgageA report released by the CFPB last week uncovered a number of issues in the mortgage servicing industry in 2013, including unfair and deceptive practices.

“Problems in mortgage servicing have plagued consumers for years and helped contribute to the financial crisis,” CFPB Director Richard Cordray said. “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 servicers to clean up their act and provide responsible customer service.”

The report said agency examiners discovered that two mortgage servicers engaged in unfair practices by failing to honor loan modifications after a servicing transfer, resulting in the borrowers being charged the wrong amount or being told to pay the wrong amount.

CFPB examiners also discovered that two servicers required borrowers to waive existing claims in order to receive a loan modification or forbearance agreement, regardless of individual circumstances. One servicer also marketed bi-weekly payment plans and misrepresented how the plans worked.

Additionally, the report said examiners found instances in which servicers misreported short sales as foreclosures, which has a much more significant negative impact on a consumer’s ability to obtain certain types of credit.

The CFPB said its examiners alerted the companies in which mortgage servicing problems were found and opened investigations where appropriate.

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