2014 Government Regulations & Business Summit
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Got problems with the company that services your home mortgage – the one that collects your payments, keeps track of your escrow account and lets you know when you’re late?
So your monthly numbers don’t look right? You got blown off by servicing personnel when you tried to get inaccuracies in your account corrected?
Well, move over. You’ve got lots of grumpy company. As of Jan. 31, just under half of the 187,818 complaints filed with the federal watchdog Consumer Financial Protection Bureau concerned mortgage foul-ups, and the vast majority of these involved servicing, loan modification and foreclosure activities by servicers.
But sometimes the problems go beyond run-of-the-mill ineptitude. As part of its statutory functions, the CFPB sends investigators into the offices of mortgage-servicing firms to check their accounts for evidence of what it calls “unfair and deceptive practices.” In their latest series of visits and supervisory audits, bureau auditors found shenanigans that might horrify unsuspecting homeowners:
• Abuses in mandatory cancellations of private mortgage insurance premiums. Servicers are required by federal law to stop collecting insurance premiums, which can run into the hundreds of dollars a month, once the principal balance on a mortgage reaches 78 percent of the original value of the property. But some servicers don’t follow the letter of the law. In one case, according to the CFPB, a servicer invented a requirement out of whole cloth – that premium payments could be canceled only if a loan was more than two years old. But there is no such requirement in federal law. Investigators also found cases where sticky-fingered servicers did not return excess mortgage insurance payments to the borrower within the 45 days that federal law requires.
• “Biweekly” mortgage payment plans that weren’t really biweekly. The biweekly payment alternative, which some servicers charge fees to set up, requires half a month’s payment every two weeks rather than a full payment once a month. Since there are 26 two-week periods in a 52-week year, payments properly credited to principal and interest biweekly can accelerate payoff of the loan and over time, potentially saving the borrower thousands of dollars in interest charges. But CFPB investigators found that one company, which it did not identify, marketed deceptive biweekly payment programs to its mortgage customers. Rather than the promised biweekly crediting of payments, the servicer instead “submitted payments monthly and retained the extra money” in its own accounts until the end of the year, at which point it made an extra monthly payment. The net result was less beneficial for the borrower than promised.