Alert September 03, 2013

CFPB Issues Report on Problems in Mortgage Servicing

The CFPB released its annual Supervisory Highlights report covering supervision work completed between November 2012 and June 2013. While covering a range of topics including auto finance and ECOA, the report focused primarily on issues related to mortgage servicing. The report’s findings include problems related to servicing transfers and payment processing. For example, CFPB examiners found problems with the transfer of loss mitigation documentation (e.g., trial loan modification payment plans), problems communicating with customers regarding the transfer, and a general absence of protocols. The report also focused on mistakes made in loss mitigation—in particular, inconsistent communications with borrowers; inconsistent underwriting; lengthy application review periods; incomplete loan files; and poor procedures for requesting additional documentation from borrowers. Recognizing that nonbanks, some of whom who had never experienced regulatory supervision by state or federal authorities, faced particular problems with compliance management, the CFPB recommended implementation of a compliance management system with four key elements: (1) oversight by the board of directors and management; (2) a formal, written compliance program including policies, procedures, training, monitoring, and corrective action; (3) a consumer complaint management program; and (4) independent compliance audits.