On the First Anniversary of New CFPB Rules, Are Mortgage Servicers Playing Fair?

Family in front of houseOne year ago, the Consumer Financial Protection Bureau (CFPB) introduced new rules to protect homeowners from incompetent customer service and abusive practices by mortgage servicers, the firms that manage mortgage payments. Partnering with the National Housing Resource Center, NCLR surveyed housing counselors across the country to find out if mortgage servicers were following these rules. Today, we’re releasing our findings in a report to show the progress made and provide recommendations for further improvement.

In the survey, we asked housing counselors to tell us how mortgage servicers had improved their communications with homeowners and housing counselors. Servicers were notorious for sending initial foreclosure notices but following with radio silence for months or even years, leaving families in limbo and feeling helpless. In addition, we asked about compliance with a new ban on “dual tracking,” a problem that has plagued the market and caused many unnecessary foreclosures. Dual tracking occurs when servicers push a family through foreclosure while simultaneously considering them for a loan modification that would otherwise help them keep their home.

CFPB_LogoWhile we found that the new CFPB rules are having an impact and compliance in some areas has vastly improved, housing counselors say mortgage servicers are flouting the rules with unacceptable frequency. Majorities of mortgage servicers did not comply with rules relating to servicers losing homeowner documents, missing deadlines for communicating with borrowers, and helping heirs upon the death of the borrower.

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  • Nearly two-thirds (65 percent) of surveyed counselors said that servicers always or often lost documents or asked borrowers to submit the same documents multiple times.
  • Though servicers are required to make a decision on loan modification requests within 30 days, a majority (57 percent) of housing counselors said that servicers always or often failed to do this.
  • Despite servicers being required to have policies in place to identify and communicate with a successor after the death of a borrower, 63 percent of housing counselors said servicers rarely or never complied with this requirement.
  • Even with dual tracking banned, about one in five (19 percent) housing counselors said servicers occasionally, rarely, or never complied with this ban, putting homeowners at risk of wrongful foreclosure.
  • Though many homeowners were originally sold mortgages in non-English languages, the lack of language services for borrowers after they signed on the dotted line is a major problem. Nearly half (48 percent) of counselors said servicers rarely or never provided non-English written communication for borrowers with limited English proficiency.
  • Servicers are required to provide borrowers with access to one or several knowledgeable points of contact, but for borrowers with limited English proficiency this was often a challenge.
  • Forty-four percent of housing counselors said assigned points of contact were never or rarely fluent in the borrower’s preferred non-English language. When translators were provided, over half (55 percent) of counselors said the translators either never or rarely had a technical understanding of relevant issues and fluency in the target language.

In 2015 we look forward to seeing more progress among mortgage servicing practices. We are glad to see that the CFPB is stepping up enforcement against violators, and we encourage the agency to continue increasing enforcement efforts. We do urge the CFPB to address language access issues severely impacting the Latino community and engage housing counselors to better gauge what is and isn’t working in real time. Additionally, we encourage the CFPB to address the chronic problem of lost documents in a future rulemaking designed to stop this practice. They must also close a loophole in the rules that currently allows mortgage servicers to decide who does and does not receive legal protection by deeming whether a loan modification application is complete.

Read the entire report below:

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