The CFPB says deficient technology is causing servicers to violate regulations – a situation for which there is ‘no excuse,’ the agency says
The Consumer Financial Protection Bureau today said that many mortgage servicers are continuing to rely on failed technology that puts them in violation of CFPB rules and harms consumers.
The CFPB said it had examined numerous mortgage servicers and found that many were in violation of servicing regulations because of deficient technology and process breakdowns, especially in the areas of loss mitigation and servicing transfers.
CFPB Director Richard Cordray had no sympathy for servicers whose outdated systems caused problems.
“Mortgage servicers can’t hide behind their bad computer systems or outdated technology. There are no excuses for not following federal rules,” Cordray said. “Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally.”
The CFPB criticized the servicing industry for “bad practices and sloppy record-keeping,” which the agency said were sometimes problems even before the financial crisis. As millions of homeowners fell behind on their mortgages after the meltdown, the problems became even more acute, the CFPB stated.
In 2014, the agency put in place rules requiring servicers to keep accurate records, give troubled borrowers direct access to servicing personnel, promptly credit payments and correct servicing errors on request. The new rules also included protections for homeowners faced with foreclosure.
But the rules necessitated heavy investments in compliance technology – investments the CFPB claims some servicers simply haven’t made.
“While the servicing market has made some investments in compliance, those investments have not been sufficient across the marketplace to ensure compliance,” the agency said. “CFPB examiners found that outdated and deficient technology poses risks to consumers across a number of mortgage servicers. … As a result of this insufficient investment, mortgage servicing problems continue to plague consumers.”
Among the most common issues noted by the agency were”
“The CFPB expects all entities under its supervision to respond to consumer complaints and identify major issues and trends that may pose broader risks to their consumers,” the agency stated. The CFPB said it would take enforcement actions if needed to correct the issue.
The CFPB said it had examined numerous mortgage servicers and found that many were in violation of servicing regulations because of deficient technology and process breakdowns, especially in the areas of loss mitigation and servicing transfers.
CFPB Director Richard Cordray had no sympathy for servicers whose outdated systems caused problems.
“Mortgage servicers can’t hide behind their bad computer systems or outdated technology. There are no excuses for not following federal rules,” Cordray said. “Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally.”
The CFPB criticized the servicing industry for “bad practices and sloppy record-keeping,” which the agency said were sometimes problems even before the financial crisis. As millions of homeowners fell behind on their mortgages after the meltdown, the problems became even more acute, the CFPB stated.
In 2014, the agency put in place rules requiring servicers to keep accurate records, give troubled borrowers direct access to servicing personnel, promptly credit payments and correct servicing errors on request. The new rules also included protections for homeowners faced with foreclosure.
But the rules necessitated heavy investments in compliance technology – investments the CFPB claims some servicers simply haven’t made.
“While the servicing market has made some investments in compliance, those investments have not been sufficient across the marketplace to ensure compliance,” the agency said. “CFPB examiners found that outdated and deficient technology poses risks to consumers across a number of mortgage servicers. … As a result of this insufficient investment, mortgage servicing problems continue to plague consumers.”
Among the most common issues noted by the agency were”
- Late, incorrect of deceptive information about loan moifications due to technological breakdowns
- Consumers getting “the runaround” when loans transfer to new servicers with different technology
“The CFPB expects all entities under its supervision to respond to consumer complaints and identify major issues and trends that may pose broader risks to their consumers,” the agency stated. The CFPB said it would take enforcement actions if needed to correct the issue.
