The new consumer financial regulator has released an outline of its plan to regulate mortgage servicers.
The Consumer Financial Protection Bureau was empowered to supervise a good share of mortgage servicers through the Dodd-Frank Wall Street Reform and Consumer Protection Act. It has the authority to examine the more than 100 banks, thrifts and credit unions with more than $10 billion in assets.
The agency is authorized to determine whether servicers are following the law, and it plans to conduct examinations of mortgage servicing practices.
The CFPB released its Mortgage Servicing Examination Procedures, which is part of the CFPB Supervision and Examination Manual. Both were released Thursday.
The procedures describe information that CFPB examiners will gather to evaluate mortgage policies and procedures, determine compliance with applicable laws and identify risks to consumers in servicing operations.
The regulator pointed to reports by other regulators that found some servicers have been unable to keep pace with the increase in delinquencies. Some servicers were found to have lost important documentation, suffered from robo-signing practices and failed to provide effective communication with borrowers.
Some borrowers who qualified for loan modifications reportedly couldn’t get them in time to avoid foreclosure. The lost modifications were the result of widespread delays and errors in transaction processing.
“The mortgage servicing market has been bogged down by widespread reports of pervasive and profound consumer protection problems,” Special Advisor to the Secretary of the Treasury Raj Date said in the news release. “We are going to take a close and measured look at whether servicers are following the law.”
The first area of focus will be distressed loans.
The CFPB plans to make sure that delinquent borrowers are informed about modifications and foreclosures in a timely manner. In addition to examining the communication process, the CFPB will ensure that borrowers are actually in default and that no duplicate default fees are being charged.
