Last week, the Consumer Financial Protection Bureau (CFPB) released a special edition supervision report focused on mortgage servicers. The report indicates that some mortgage servicers are putting themselves in violation of CFPB’s new servicing rules by continuing to use failed technology which harms consumers. This, combined with process breakdowns within servicing companies have spurred the CFPB to release an updated mortgage servicing exam manual.
“Mortgage servicers can’t hide behind their bad computer systems or outdated technology. There are no excuses for not following federal rules,” said CFPB Director Richard Cordray. “Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally.”
As millions of borrowers fell behind on their loans because of the financial crisis, many servicers were unable to provide the level of service necessary to meet homeowners’ needs. In order to address this, the CFPB put into place new rules in order to eliminate and remove surprises for homeowners, offering protections for struggling homeowners and those facing foreclosure.
CFPB has since found, however, that “outdated and deficient technology poses risks to consumers across a number of mortgage servicers. In addition, several mortgage servicers lack proper training, testing, and auditing of their computer systems and software platforms and those of their service providers.”
Specific examples of ongoing problems include:
- Information about loan modifications is late, incorrect, or deceptive due to technological breakdowns or malfunctions.
- Consumers get the runaround when loans transfer to a new servicer with incompatible computer systems.
As a result of this update to the institution's exam manual, mortgage servicers should note a greater emphasis in exams on Complaint handling and requests by troubled borrowers, as well as discrimination issues.