A New Approach for the CFPB: Mortgage Servicers and Enforcement Actions
The Consumer Financial Protection Bureau (CFPB) has increased its focus on mortgage servicers. Mortgage servicing intersects two CFPB priority areas: COVID-19 relief and discrimination enforcement. Mortgage servicers should be prepared for a significant increase in the CFPB’s regulatory activity.
For example, servicers should expect high scrutiny over servicing loans in or exiting forbearance programs. Recent CFPB announcements and supervisory highlights indicate that the agency will focus intensely on the management of servicer risks, controls, and compliance systems related to forbearance programs. Just earlier this year, the CFPB compliance bulletin warned mortgage servicers: “unprepared is unacceptable.”
We also expect there to be an increasing focus on the Equal Credit Opportunity Act-related outcomes of lending and servicing decisions. The Acting Director announced in early 2021 that racial equity is one of the CFPB’s two top priorities, and we expect that this will continue once a permanent Director is confirmed.
Based on these recent CFPB actions, Patomak believes that CFPB scrutiny of servicer compliance programs will particularly focus on:
· The accuracy and timeliness of forbearance request processing. Servicers will need to show that requests are processed in a timely way, and that borrowers are not erroneously enrolled in forbearances.
· Loss mitigation options. The CFPB wants servicers to timely evaluate loss mitigation applications and ensure that borrowers are evaluated for and notified of all applicable loss mitigation options.
· The nature of borrower interactions as forbearance programs end. The CFPB expects servicers to alert borrowers in a timely manner before forbearance ends so that there is adequate time to apply for help. The CFPB also expects servicers to help borrowers assemble necessary documentation for further assistance.
· Lengthy hold times and inadequate actions to prevent foreclosure. Servicers who withhold times for borrower requests that last longer than industry averages will be scrutinized, as will servicers who do not provide enough time for borrowers to save their homes before foreclosure is initiated.
· Fairness and accessibility issues. The CFPB will pay close attention to Equal Credit Opportunity Act compliance regarding communications with non-English-speaking borrowers and to what income sources are used to determine eligibility for loss mitigation options.
· Whether complete and accurate information or forbearance is provided. The CFPB has warned against servicers providing incomplete or inaccurate information regarding forbearance programs.
Patomak houses experts from the CFPB, the Federal Reserve System, the OCC, and the Department of Treasury. Our team would be happy to assist with issues arising from the CFPB’s new approach and recent focus on mortgage servicers.