Mortgage servicers still have not gotten their act together when it comes to following rules designed to protect consumers.
The Consumer Financial Protection Bureau found numerous problems at the companies that collect borrowers' mortgage payments after examining various mortgage servicers nationwide from November through June, shows a recently-released CFPB report.
Do as they say, not as they do?
Despite new servicing regulations and a push by the federal agency to improve servicing standards, some servicers still fail at basics such as notifying borrowers of a change in the address to where payments should be sent.
The report doesn't identify the servicers examined, but cites various examples of the types of sloppy practices found at the servicing companies, including:
- Failure to inform borrowers that their loans had been transferred to another servicer.
- Charging borrowers default fees that were supposed to be paid by investors who purchased the loans.
- Botching tax payments that the servicer is supposed to make with the money in a borrower's escrow account.
- Missing documents and disorganized files in loss-mitigation programs such as a loan modification.
Like toddlers, servicers make messes and don't clean them up
The CFPB has long urged mortgage servicers to correct their sloppiness and have issued new mortgage servicing rules that go into effect in January. But rules aren't enough to fix these problems unless there's enforcement, says Philip Stein, an attorney and partner at Bilzin Sumberg in Miami. He often represents originators and sellers of mortgage loans as they defend against loan repurchase claims by banks and other investors.
"They still have not really been forced to get their houses in order," Stein says of servicers that have yet to comply with the CFPB's guidelines. But as these servicers move from this guideline phase into next year, when the rules will supposedly be enforced, they might decide to take the rules a little more seriously.
Like toddlers, servicers occasionally need punishment
"They have to feel fear and be motivated by that fear to correct things," Stein says. "For a long time, servicers have largely gotten away with doing things in a sloppy fashion when servicing loans."
Stein says he is "cautiously optimistic" about whether homeowners will get better service from their mortgage servicing companies next year.
What do you think? Will servicers do a better job for homeowners under the new rules?
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