By Katalina M. Bianco, J.D.
It's been more than a year since the Consumer Financial Protection Bureau's mortgage rules took effect, but according to the bureau's latest "Supervisory Highlights," examiners continue to find mortgage loan servicers engaging in dual tracking and mishandling loss mitigation applications, all in violation of the rules.The report on the bureau’s supervisory activities in the first four months of the year also describes violations at debt collection companies and credit reporting agencies. Two areas of concern noted in the report—consumer reporting agency handling of consumer disputes and fair lending violations by mortgage originators—are similar to violations described in the previous “Supervisory Highlights,” published in March 2015.
Mortgage servicing. Mortgage servicers’ ability to engage in dual-tracking—simultaneously considering mortgage relief and moving toward foreclosure—is significantly limited by the CFPB’s mortgage servicing rules. However, the bureau’s examiners found at least one servicer that had sent pre-foreclosure notices to consumers who already had been approved for trial loan modifications, the bureau says. This could lead consumers to think that the servicer had abandoned the trial modification.
Examiners also found that one servicer erroneously sent foreclosure warnings to borrowers who were not in default. Some servicers were not handling loss mitigation applications according to the rules, the CFPB reported. One servicer was found to have demanded that borrowers furnish duplicate or irrelevant documents. Others, the bureau said, failed to tell borrowers whether their loss mitigation applications were complete or deficient. That notice is required within five days of when an application is received.
Debt collection. Some debt collection companies examined by the bureau were found not to have adequate compliance management systems. More specifically, the bureau said+ that at least one company did not properly record or deal with complaints or other inquiries from consumers. In some cases, the consumer contacts were placed “in an electronic queue that never got reviewed or resolved.”
Consumer reporting. Accuracy problems continued to crop up at consumer reporting agencies, the CFPB said. The bureau attributes the problems to information collection and quality control issues, including a failure to monitor the accuracy of information furnishers’ reports and an absence of checks on consumer report accuracy.
The CFPB’s previous report, covering the last third of 2014, said that some consumer reporting agencies were failing in their obligation to forward all relevant consumer information to furnishers when consumers claimed errors.
Fair lending. According to the report, examiners found instances when mortgage loan originators discouraged consumers who would have relied on public assistance from making applications for loans. This practice would violate the Equal Credit Opportunity Act and Reg. B—Equal Credit (12 CFR Part 1002), the bureau said. The same charge was levied in the last report.
Last month, the bureau specifically warned lenders not to discriminate against loan applicants whose income includes payments under the Section 8 Housing Choice Voucher Homeownership Program
Learning tool. At the recent regulatory compliance convention hosted by the American Bankers Assocation, CFPB supervisory staff recommended using the bureau's "Supervisory Highlights" as a learning tool. These supervisory reports can provide insight into areas in which the bureau has focused on, and will continue to target, and specific activities that have triggered supervisory action. Take a good look. That's advice straight from the CFPB.
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