The CFPB published its Fall Supervisory Highlights this week, highlighting examinations across various financial products that were conducted between May 2015 and August 2015. The Report highlights key findings made by the CFPB and provides insight into the current focus of the examiners. While the CFPB did acknowledge that mortgage servicers have made significant improvements over the last several years, the Report notes that regulators “continue to see that inadequacies of outdated or deficient systems pose considerable compliance risk for mortgage servicers, and that improvements and investments in these systems can be essential to achieving an adequate compliance position.” Supervisory Highlights, p. 15 (Issue 9, Fall 2015).
Specifically, the CFPB noted the following issues worth mention:
- Deficiencies in policies and procedures regarding certain objectives required by Regulation X, particularly:
- Servicers lacked policies and procedures for identifying and facilitating communication with successors of deceased borrowers with respect to the property secured by the deceased’s loan;
- Servicers failed to have adequate policies and procedures which allowed for the identifying with specificity all loss mitigation options for which a borrower may be eligible and soliciting loss mitigation applications that are consistent with those options;
- Servicers failed to have adequate policies and procedures which allowed for properly evaluation loss mitigation applications forall options which the borrower may be eligible for, including all loss mitigation options provided by the lender or the assignee of the lender;
- Servicer’s policies and procedures were not robust enough which regard to allowing and facilitating the sharing of information regarding the status of any evaluation of borrower’s loss mitigation application and the status of any foreclosure proceeding. The CFPB noted that there were break downs in communications where servicers did not timely communicate that a loss mitigation application had been approved to their foreclosure attorneys.
- The CFPB also noted break downs in issues with sufficient communications with consumers regarding their loss mitigation applications. For example, the Report notes that:
- Servicers prematurely denied loss mitigation during the period in which the borrower was given additional time to supplement their applications;
- Servicers did not effectively communicate rights to appeal denials of the loss mitigation applications.
- Servicers impermissibly required borrowers to waive defenses, set offs and counterclaims in order to enter into mortgage repayment and loan modification plans.
- The CFPB also made a point of noting that mortgage servicers cannot charge additional fees for payment over phone unless: (a) the mortgage documents expressly authorize the same; and/or (b) the borrower’s state of residence expressly allows the same.
Mortgage servicers should continue to review their compliance management systems to continue to insure their loss mitigation procedures are in compliance with Regulation X and always pay particular attention to issues highlights by regulators in the Supervisory Highlights.