Compliance Blog

Written by JiJi Bahhur, Director of Regulatory Compliance

Recently, the Consumer Financial Protection Bureau (CFPB) released its winter 2013 edition of Supervisory Highlights, a report highlighting issues it uncovered through its supervision program during a specified period of time.   The winter edition includes supervision work completed between July and October 2013, and highlights problems like unfair and deceptive practices in the mortgage servicing market. 

In this edition of the Supervisory Highlights, the CFPB made it a priority to address mortgage servicing problems so that servicers can make necessary changes and prepare for compliance with the new mortgage servicing rules.  The new rules, which went into effect on January 10, 2014, require servicers to maintain accurate records, give troubled borrowers direct and ongoing access to servicing personnel, promptly credit payments, and correct errors on request.  The rules also provide strong protections for homeowners facing foreclosure. 

The CFPB’s press release summarizes some of the items that mortgage servicers were cited for, specifically relating to the ban on unfair, abusive or deceptive acts and practices.  These include: 

• “Unfair practices with servicing transfers: The rights to manage a loan are frequently bought and sold among servicers. Examiners found that two servicers engaged in unfair practices by failing to honor existing permanent or trial loan modifications after a servicing transfer, which resulted in borrowers being charged the wrong amount or being told to pay the wrong amount.

 

• Waiving consumer rights: CFPB examiners found that two servicers were requiring borrowers to waive any existing claims in order to get a forbearance or loan modification agreement. The examiners found these broad waiver clauses to be unfair as they were done without regard to individual circumstances.

 

• Poor payment processing: Servicers are responsible for processing loan payments and handling tax and insurance payments through escrow accounts. Examiners found that a servicer was marketing bi-weekly payment plans and misrepresenting how the plans worked. As a result, consumers did not save money the way they thought they would. Another servicer told some borrowers they would receive refunds from their escrow accounts, when in fact they would not.

 

• Failing to provide correct information to consumer reporting agencies:  Mortgage servicers generally provide data to consumer reporting agencies.  CFPB examiners found cases where servicers were misreporting short sales as foreclosures, which have a much more negative impact on a consumer’s      ability to get certain types of credit.”

Companies that were cited for the above violations were notified and required to take remedial measures.  In certain instances, the CFPB opened investigations for potential enforcement actions.

Even though the CFPB only supervises credit unions with total assets of more than $10 billion, the Supervisory Highlights can serve as a useful tool for credit unions of all sizes.  Why you ask?  The credit union can check their current practices and make necessary adjustments to potentially avoid scrutiny from their applicable examining agency, at least on those particular issues. 

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It’s Friday!  And even better, the weekend has arrived.  I like to take this time to try to take a time-out from compliance land.  Speaking of time-outs, my husband and I have attempted to implement “time-out” with our 17-month old son because he loves to pull his twin sister’s hair, steam roll her, use her as a bench, etc.  Last weekend, my son, Kyse, decided he wanted to break the blinds in the living room, which he successfully did.   Before my husband or I could even say anything, Kyse immediately ran to the time-out chair and sat down like it was common procedure.  I’m pretty sure both of our jaws hit the ground; we had to walk away quickly because we both were about to burst out into laughter.

Have a great weekend!