With a recession looming, mortgage servicers have plenty of things to be concerned about heading into 2023. However, there is one challenge all servicers should have on their radar – the Consumer Financial Protection Bureau (CFPB), which is actively on the lookout today for bad actors.
Since the end of the pandemic, the agency has escalated its enforcement efforts toward mortgage servicers that failed to meet federal regulations involving everything from collecting mortgage debt to providing homeowners with assistance. Below are three particular areas of focus that servicers should know about, and how they can stay out of the CFPB’s crosshairs.
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Early in the pandemic, the CFPB offered some regulatory leeway to mortgage servicers that, for the most part, have been doing their best to help borrowers who had trouble making mortgage payments. Since the economy has recovered, however, the agency has been cracking down on violations of the CARES Act, which provides forbearance protections to borrowers with federally backed loans.
In fact, CFPB recently handed out a $5.25 million penalty against one large servicer for misleading borrowers who sought forbearance into paying improper late fees and then reporting their forbearance status to credit reporting companies. According to the agency, the servicer also misrepresented how long borrowers could stay on forbearance plans and implied borrowers needed to provide more details about their financial situation than required by law.
Mortgage servicers that also originate loans need to be aware of Regulation Z, which prohibits certain practices involving how mortgage originators are compensated. The CFBP’s Fall 2022 Supervisory Highlights report details how a number of mortgage organizations were cited for improperly reducing a loan originator’s compensation to cover increases in settlement costs.
The agency cited one company for including a waiver in its loan agreements that barred consumers from bringing a class action lawsuit against it, which is also a Reg Z violation. The company had to remove the waiver and send a notice to affected borrowers.
In addition to enforcing CARES Act and Reg Z violations, the CFPB is continuing its campaign against what it calls “junk fees.” According to its Supervisory Highlights report, the agency found some servicers charged illegal fees when placing borrowers on forbearance plans. Others were cited for taking advantage of borrowers by charging large phone payment fees without disclosing them.
For example, examiners discovered some servicers charged borrowers $15 for making loan payments by phone with customer service representatives. Borrowers were never told about the fees, but servicers charged them anyway.
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At the end of the day, staying compliant with an increasingly vigilant agency like the CFPB is impossible without the proper resources in place. And the most crucial resource servicers have – besides their people – is the technology they rely on to accept payments, manage escrow accounts, and ensure borrowers get the information and assistance they need when they need it most.
This realization is why many servicers over the years have selected MCC Mortgage Solutions for their technology needs. We built the most complete and customizable software for managing the full gamut of mortgage servicing operations, while making it simple and easy to stay compliant with the CFPB and all other state and federal agencies.
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Our platform includes comprehensive and customizable reporting capabilities for all loss mitigation options as well as an interactive collection module that monitors delinquencies and alerts servicers based on user-defined criteria. It can also interface with IVR technology, power dialers and borrower-facing tools, so servicers can provide their customers with instant access to support and service customers at all times.
To find out more about how MCC Mortgage Solutions can help you avoid unwanted attention from the CFPB, just give us a call at 248-350-9290 or email us at: firstname.lastname@example.org.