The Consumer Financial Protection Bureau recently published its 18th Edition of Supervisory Highlights, reviewing supervisory actions taken in the latter half of 2018. The Supervisory Highlights outline four sectors that received significant supervisory attention. Mortgage servicing once again made the list, alongside automobile loan servicing, deposits, and remittances. The findings related to mortgage servicing violations reiterate the need for up-to-date policies and procedures, as well as mechanisms to ensure adherence.
In supervision of mortgage servicers, CFPB examiners uncovered unfair and deceptive acts and practices, as well as misleading statements. The violations were related to unauthorized consumer late fee charges, denials for removal of private mortgage insurance (PMI), incomplete loss mitigation and foreclosure timeline adherence for successors-in-interest and Home Equity Conversion Mortgages (HECMs).
Unauthorized Charges
Some servicers were identified as charging consumers unauthorized late fees in excess of amounts set by Federal Housing Administration (FHA) guidelines and state law. Examiners pointed to “programming errors in the servicing platform,” as one of the primary causes of these violations, as well as “service provider oversight.” These findings emphasize the importance of maintaining accurate and up-to-date technology. Failing to observe fee limits can put servicers at risk for fines and borrower remediation. The CFPB reported that the servicers with these issues were required to change their policies and procedures to avoid repeat offenses.
PMI Denials
Incomplete borrower communications and criteria led to inappropriate denials on requests for removal of PMI, according to the Supervisory Highlights. The CFPB found that servicers failed to provide accurate reasons for denials to borrowers. Examiners found that “servicer communications would likely mislead consumers about whether and when the Homeowners Protection Act (HPA) entitled [borrowers] to request that the servicer cancel PMI, and about the actual reasons the borrowers were not eligible for PMI cancellation.” Again, in this instance, out-of-date policies and procedures played a notable role in the misrepresentation. The servicers involved updated their communication templates and their internal policies.
Loss Mitigation Applications
Examiners found that some mortgage servicers failed to conduct reasonable diligence related to loss mitigation applications. Servicers are required to exercise “reasonable diligence” when obtaining the documentation and information needed to evaluate a borrower for loss mitigation options. In some instances, servicers offered borrowers short-term forbearance programs, because they received an incomplete loss mitigation application, but failed to inform borrowers of this reasoning. At the conclusion of the forbearance program, servicers did not reach back out to the borrowers about completing their applications to pursue additional loss mitigation options. To remedy these violations, servicers “used enhanced processes, such as a centralized queue, to track borrowers” movement in the loss mitigation process and notify them appropriately as different options became available.
Prevention
The CFPB explains that Supervisory Highlights are “disseminated to help institutions better understand how the Bureau examines organizations for compliance with [rules and requirements].” It’s important that mortgage servicers take note of the findings and learn from the experience of their peers on how to avoid costly violations.
The CFPB’s most recent findings could have been easily avoided with up-to-date policies, processes, controls, and internal oversight. Additionally, the highlighted errors could have been circumvented in a cost-effective manner through process automation. Coupling policy and process administration with automation embeds the standards and provides operational visibility.
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Clarifire has been partnering with servicers for over a decade, providing them with a sophisticated, proven workflow application that readily incorporates workout financial rules tied to policy, processes, pre-emptive metrics, communications, and timelines. The CLARIFIRE® application is designed to automate servicing operational processes, including borrower eligibility requirements, regulatory rules and displays of qualification, automation of required documents, and communications. An extensive workout underwriting rules engine tied to loss mitigation standardized workflows and disaster modifications completes the innovation that your organization needs with CLARIFIRE.
To find out more on how you can avoid issues such as those identified by the CFPB in an easy to deploy, cost-effective manner, contact Clarifire today at 866.222.3370, or visit us at eclarifire.com.
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