2021 was a busy year for the mortgage industry and their compliance teams. It seems as though the Consumer Financial Protection Bureau (CFPB) worked through the holidays to build their 2022 to-do list, and 2022 will be a busy year for the Bureau, especially as it pertains to mortgage servicing.
It's hard to believe that another year has passed! I hope that the holidays afforded each of you an opportunity to relax and enjoy time with family and friends. Usually, our holidays are filled with friends and extended members of our family as well as a few college students (who were unable to travel home for the holidays this year) from the university where my husband works. Due to the pandemic, weren’t able to fill our home with our extra special guests, however, we still delivered them a delicious home-cooked meal. Although we couldn’t be together, we remain committed to doing our part to make the holidays special for those unable to be with their families-and for that, I am thankful!
2022 has gotten off to quite a busy start for all of us at PerformLine as we are gearing up for what is shaping up to be a pretty busy year. I've heard people say that when an administration changes, you typically don't feel the changes they are making until well into the second year of that administration. I'm pretty sure that much of the writing was on the wall in year one and it looks like the government is off to the races…
A Look Back at Mortgage Servicing in 2021
The pandemic has been hard on many households and the CARES Act was a temporary lifeline that allowed homeowners some protections to get them through with hopes that they would be able to avoid foreclosure. Unfortunately, there have been many examination findings that have resulted in regulators expressing some reluctance in their willingness to trust that servicers are getting it right.
In the fall issue of the Supervisory Highlights, the CFPB reported several issues including violations of Reg Z, Reg X, and unfair and deceptive acts and practices as prohibited by the CFPA.
Other concerns noted by the CFPB included:
- The discovery of unfair acts including some instances where servicers charged fees to consumers in forbearance and in some instances, failure to refund those fees for well over a year
- Failure to terminate preauthorized EFTs
- Charging consumers unauthorized amounts for services, resulting in allegations of unfair acts and practices as consumers were hit with repeated NSF fees
- Misrepresentation of transactions and payment histories
- Failure to evaluate loss mitigation application in a timely manner
- Incorrect handling of partial payments and failing to terminate PMI on time
The CFPB also pointed out concerns around board oversight, training, and monitoring related to mortgage servicing that lead to the enabling of some of the above noted unfair practices.
What This Means for Mortgage Servicers in 2022
For much of 2021, I wrote a lot on fair lending and how even unintended actions could result in a fair lending violation. I also shared the importance of tightening up on your fair lending compliance programs as the writing was on the wall that the new administration was focused on ensuring equity. In 2022, it can be expected that regulators will be looking closely at the entire life of the loan-and that includes servicing. It has been noted that the CFPB will be looking at the impact of Artificial Intelligence and how that information drives both marketing and credit decisions.
I have also noted that this is a more public CFPB and they will not hesitate to make their enforcement decisions known through press releases. The CFPB has made it clear not only are they going to enforce, but it is also likely that penalties will be larger.
The pandemic was very hard on many, however it really hit one segment of the population pretty hard, and that was people of color. Although the forbearance rate has continued to show improvement, there is still a desire from the government to ensure that this population is treated fairly and offered options that could help them keep their homes.
In December, twenty state attorney generals shared that several mortgage servicers of FHA-approved lenders had failed to properly implement the loan modification options introduced by FHA with a required implementation date of October 21, 2021. This program allows streamlined modification options for borrowers to keep their homes and avoid foreclosure.
It is instances such as this that have regulators on alert, as a servicer failing to provide the proper information to a borrower seeking an option to keep their home could end up losing their home. So often, these failures in the process have a negative impact on minority populations.
PerformLine: The Compliance Solution for Mortgage Servicers
Here at PerformLine, we regularly discuss the importance of having a sound compliance management process in place to prevent some of the regulatory issues as noted above. If you have not already done so, this is a good time to learn how PerformLine can help you to prepare for what is shaping up to be a busy year ahead. The CFPB is one of many regulators that may be looking at your business and being unprepared is not an option.
Do you need more eyes on your mortgage servicing? Let us show you how we can support your compliance monitoring. Not sure where to start? Speak to one of our experts and allow us to show you how having Performline can help you mitigate risk while protecting your brand