Editor: David Reiss
Brooklyn Law School

August 22, 2013

Sloppy Servicers

By David Reiss

I have blogged about the Alice In Wonderland-like and Dickensian situations faced by defaulting homeowners, but now the CFPB has offered a broader look at the problems that borrowers confront when facing foreclosure. The CFPB’s Supervisory Highlights Summer 2013 profiles some of the problems in the loss mitigation field, including

  • Inconsistent borrower solicitation and communication;
  • Inconsistent loss mitigation underwriting;
  • Inconsistent waivers of certain fees or interest charges;
  • Long application review periods;
  • Missing denial notices;
  • Incomplete and disorganized servicing files;
  • Incomplete written policies and procedures; and
  • Lack of quality assurance on underwriting decisions. (14)

The CFPB also noted some serious violations in the transfer of loans between servicers: “For example, examiners found noncompliance with the requirements of the Real Estate Settlement Procedures Act (RESPA) to provide disclosures to consumers about transfers of the servicing of their loans.” (12)

They also found problems processing default-related fees: “Examiners identified a servicer that charged consumers default-related fees without adequately documenting the reasons for and amounts of the fees. Examiners also identified situations where servicers mistakenly charged borrowers default-related fees that investors were supposed to pay under investor agreements.” (13-14)

Now, obviously, not all servicers had all of these problems, but the CFPB’s findings are consistent with what many courts have described anecdotally in their opinions.  Time will tell whether the CFPB will be able to get servicers to devote the necessary resources to reduce these types of problems to more acceptable levels.


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