On April 24, 2024, the CFPB published an edition of Supervisory Highlights describing the agency’s actions to combat junk fees charged by mortgage servicers, as well as other illegal practices. The CFPB found that servicers are charging illegal junk fees, such as prohibited property inspection fees; sending deceptive notices to homeowners; and violating loss mitigation rules that help struggling borrowers stay in their homes.
In recent years, the CFPB focused on unfair and illegal fees various financial areas. Most recently, the CFPB announced a final rule that will cut credit card late fees by over $10 billion annually. Another proposed rule could save consumers $3.5 billion a year on overdraft fees, and the agency is also dealing with fees on international money transfers. Overall, overdraft and insufficient fund fees have gone down by $6.1 billion because of the CFPB's actions.
CFPB Director Rohit Chopra said the following in as statement:
“Homeowners cannot just simply switch providers if their mortgage servicer charges them illegal junk fees. Since mortgage borrowers are captive to a company they never chose to do business with, we are working hard to detect and deter violations of law.”
Key findings from the Supervisory Highlights include mortgage servicers:
Illegally charging and obscuring fees. Mortgage companies charged homeowners prohibited fees like property inspections and late fees that were higher than agreed upon. They also failed to adequately explain these fees on statements.
Keeping homeowners on the hook for fees during COVID-19. Some servicers failed to waive late fees and penalties, as required.
Missing deadlines to pay property tax and home insurance. Mortgage companies took money for taxes and insurance but didn't pay on time, leading to penalties for some borrowers. Companies covered penalties only if homeowners complained.
Deceiving homeowners and failing to properly evaluate them for repayment options. Several servicers wrongly informed struggling homeowners they were approved for repayment plans when no final decisions were made, later rejecting some. Servicers also sent some homeowners false notices that they missed payments and instructed them to apply for repayment, while improperly denying requests for assistance and not assessing borrowers for repayment options as per CFPB rules.
In response to the CFPB’s findings, financial institutions refunded junk fees to borrowers and are taking corrective actions, including changes to their policies and procedures.
Read the CFPB’s press release here.
The full Supervisory Highlights can be found here.
