Skip to main content

CFPB Guides Mortgage Servicers on Consumer Protection in Loan Transfers

NationalMortgageProfessional.com
Feb 11, 2013

The Consumer Financial Protection Bureau (CFPB) has issued a bulletin advising mortgage companies about their legal obligations that protect consumers during loan transfers between mortgage servicers. When handing over the processing of loans, mortgage servicers should not lose paperwork, lose track of a homeowner’s loss mitigation plans, or hinder a consumer’s chances of saving their home from unnecessary foreclosure. The CFPB has a heightened concern about these practices given the large number and size of recent servicing transfers. “Consumers should not be collateral damage in the mortgage servicing transfer process,” said CFPB Director Richard Cordray. “This guidance directs all mortgage servicers, both banks and nonbanks, to follow the laws protecting borrowers from the risks of such transfers, and makes clear that we will be monitoring them for compliance.” Servicing transfers can be positive for consumers, especially when investors require non-performing servicers to transfer rights to specialty companies that offer better service. But mortgage servicing transfers can also mean consumers must deal with new companies to pay their bills—often with different-looking paperwork, different staff, and different addresses to send the payments. If the transfer process is not handled properly, consumers may find that their servicer lost important loss mitigation documents or that the servicer did not credit their payments on time. Through public feedback and its supervision activities, the CFPB has noted a significant number of servicing complications related to the large amount of servicing transfers that have occurred in the last year. In many cases, banks have transferred the servicing of troubled loans to more specialized nonbank servicers. Because the CFPB has supervisory authority over both banks and nonbanks, it is reminding everyone in the mortgage servicing industry to minimize the risks that these servicing transfers can present to consumers. “The Federal Housing Finance Agency (FHFA) supports the CFPB’s efforts to improve servicer compliance with legal requirements related to mortgage servicing transfers. FHFA shares the goal of improving servicer performance, which will result in better outcomes for both  consumers and investors," said a statement from the FHFA. "FHFA has played an active role in aligning the policies of Fannie Mae and Freddie Mac to streamline servicer processes and expedite outreach to borrowers to prevent foreclosures, keep homes occupied and help maintain stable communities.” Given that millions of borrowers have been impacted by servicing transfers, and given the prevalence of homeowners struggling to remain current on their mortgages, the CFPB will make servicing transfer-related problems a focus of its supervisory activities. If servicers are not fulfilling their obligations under the law, the CFPB will take appropriate actions to address these violations and seek all appropriate corrective measures, including remediation of harm to consumers. The guidance also informs the industry that the CFPB will be taking a close look at: ►How a servicer has prepared for the transfer of servicing rights or responsibilities: This includes what steps the servicer is taking to ensure there is no unnecessary disruption to consumers. CFPB examiners will also be focused on how, after the transfer, the new servicer plans to respond to consumer inquiries about the transfer and whether employees are trained to handle consumer questions and complaints. CFPB examiners will look for what the new servicer is doing to provide consumers accurate information about their loans, such as the amount they owe, the status of their loss mitigation application or plan, and their delinquency status, if relevant. ►How the new servicer handles the files it receives through a transfer: If a consumer’s paperwork and relevant documents are not handed over to the new servicer, a struggling homeowner attempting to stay in the home may be forced to restart their loss mitigation process. This can be frustrating, costly, and, in the worst cases, can mean the difference of keeping and losing a home. ►What policies the servicers have to prevent borrower harm for loans with loss mitigations in process: Because owners of the loans, not servicers, establish loan modification program requirements, it should not matter who is servicing the loan. Consumers who have come to an agreement through their servicer on a loan modification should have those plans honored by the new servicer. The CFPB will focus on whether the new servicer properly considers any previous agreements before demanding or collecting amounts due. When previous plans are not honored, consumers have to start the process for saving their home all over again, and that could lead to unnecessary foreclosure. In January 2013, the CFPB announced new mortgage servicing rules that included rules obligating servicers to maintain certain policies and procedures when transferring loans. The new rules go into effect in January 2014 and specify, for example, that mortgage servicers must be able to transfer documents and information in a timely manner. This includes information about the current status of discussions with a borrower on loss mitigation options, such as choices the lender is giving the borrower to work out an alternative mortgage payment plan.
Published
Feb 11, 2013
CFPB Reports Trends In Financial Assistance

The latest developments from this study reveal that most consumers have exited the payment assistance they received at the start of the pandemic.

Analysis and Data
Jul 14, 2021
CFPB Orders GreenSky To Refund $9M In Unauthorized Loans

The consent order requires GreenSky to refund or cancel up to $9 million in loans for the customers harmed by this illegal conduct.

Regulation and Compliance
Jul 13, 2021
CFPB Warns Landlords And Consumer Reporting Agencies To Report Accurate Rental Information

Inaccurate rental or eviction information can unfairly block families and individuals from safe, affordable housing.

Regulation and Compliance
Jul 01, 2021
FHFA Mandates Quarterly Fair Lending Reports

FHFA issued orders for all enterprises to submit quarterly Fair Lending Reports with data and information to improve the FHFA’s capabilities. 

Regulation and Compliance
Jul 01, 2021
FHFA Follows CFPB To Protect Borrowers Once COVID-19 Foreclosure And Eviction Moratoriums End

The Federal Housing Finance Agency made it clear that Fannie Mae and Freddie Mac servicers are not permitted to make first notice or filing for foreclosure that would be prohibited by the CFPB protections for borrowers affected by COVID-19.

Regulation and Compliance
Jun 30, 2021
CFPB Finds Evidence Of Redlining And Deceptive Acts In 2020

Enforcement actions resulted in more than $124 million in consumer remediation and civil money penalties in 2020

Regulation and Compliance
Jun 29, 2021