On April 24, 2024, the CFPB issued its Supervisory Highlights Spring 2024 edition which covered select examinations regarding mortgage servicing that were completed from April 1, 2023 through December 31, 2023. Examiners found that mortgage servicers engaged in UDAAPs and regulatory violations while processing payments by overcharging certain fees, failing to adequately describe fees in periodic statements, and not making timely escrow account disbursements.
The report highlights the following persistent UDAAP and regulatory violations at mortgage servicers related to loss mitigation practices as identified by the CFPB examiners:
Unfair charges for property inspections prohibited by investor guidelines. Servicers engaged in unfair acts or practices by charging property inspection fees on Fannie Mae loans where such inspections were prohibited by Fannie Mae guidelines. In response to these findings, the servicers corrected automation flaws behind some of the improper charges and implemented testing and monitoring to address the others. The servicers were also directed to identify and remediate borrowers who were charged fees contrary to investor guidelines.
Unfair late fee overcharges. Servicers engaged in unfair acts or practices by assessing unauthorized late fees (1) that exceeded the amount allowed in the loan agreement and (2) even though consumers had entered into loss mitigation agreements that should have prevented late fees. In response to these findings, servicers refunded the fees and improved internal processes.
Failing to waive existing fees following acceptance of COVID-19 loan modifications. In response to these findings, servicers are remediating consumers.
Failing to provide adequate description of fees in periodic statements. Servicers failed to provide a brief description of certain fees and charges in violation of this provision when they used the general label “service fee” for 18 different fee types, without including any additional descriptive information. In response to these findings, the servicers implemented changes to provide more specific descriptions of each service fee.
Failing to make timely disbursements from escrow accounts. Servicers attempted to make timely escrow disbursements, but the payments did not reach the payees. The servicers did not resend the payments until months after the initial payment attempts. In response to these findings, the servicers were directed to comply with this regulation and remediate borrowers.
Deceptive loss mitigation eligibility notices. Servicers engaged in deceptive acts or practices when they sent notices to consumers representing that the consumers had been approved for a streamlined loss mitigation option even though the servicers had not yet determined whether the consumers were eligible for the option. In fact, some consumers were ultimately denied the option. In response to these findings, the servicers reviewed affected borrowers who remained delinquent to ensure they were considered for appropriate loss mitigation options.
Deceptive delinquency notices. Servicers engaged in deceptive acts or practices when they sent notices informing certain consumers that they had missed payments and should fill out loss mitigation applications, when they actually didn't need to make a payment. s. In response to these findings, servicers are implementing additional policies and procedures to ensure accuracy of notices.
Loss mitigation violations. Servicers violated Regulation X by sending acknowledgment notices to borrowers that failed to specify whether the borrowers’ applications were complete or incomplete. In addition, servicers did not provide timely notices stating the servicers’ determination regarding loss mitigation options. In response to these findings, the servicers updated their policies and procedures and refunded or waived late charges and corrected negative credit reporting for impacted consumers.
Live contact and early intervention violations. Servicers failed to make good faith efforts to establish live contact with hundreds of delinquent borrowers. The servicers took corrective action which included providing remediation to harmed borrowers including refunding or waiving late fees. Servicers also failed to send written early intervention notices to thousands of delinquent borrowers and in response to these findings, the servicers identified and provided remediation to affected borrowers who were assessed late fees for missed payments after the 45th day of delinquency.
Failing to retain records documenting actions taken on mortgage loan accounts. Servicers failed to document certain actions in their servicing systems, such as establishing live contact with borrowers, in violation of this provision. In response to these findings, the servicers were directed to enhance training and monitoring to ensure compliance with this requirement.
The full Supervisory Highlights can be found here.
