Examiners from the Consumer Financial Protection Bureau soon will visit the servicing shops of the nation’s largest banks to check on their handling of defaulted borrowers seeking loan modifications or entering the foreclosure process.
“Our examiners will look at mortgage servicing practices when they conduct their routine examinations,” said Raj Date, who heads the new bureau which does not yet have a Senate-confirmed director.
As for exactly when the examiners might be arriving at the servicing shops, that’s unclear.
“We are going to take a close and measured look at whether servicers are following the law, he added. (Officially, Date is the special advisor to the Secretary of the Treasury for the CFPB.)
Date told reporters Thursday that the servicing industry has “structural problems” that has under-invested in technology, people, and processes. “It’s no surprise that servicers are plagued by pervasive and profound consumer protection issues.”
Examiners will look specifically at the application process for loan modifications to make sure servicers are providing consumers with accurate and clear information about alternatives to foreclosure.
The process for referring loans to foreclosures will be reviewed to confirm that borrowers are “actually in default and all the necessary records have been carefully reviewed,” according to the bureau.
In addition, examiners will check the fees servicers charge at-risk borrowers to make sure they are not “duplicative or otherwise illegal.”
The CFPB has supervisory and enforcement powers over all servicers — including independent mortgage bankers. However, Congress specifically empowered the bureau to conduct examinations of banks, thrifts and credit unions with more than $10 billion in assets and their affiliates.
The new bureau, which opened its doors in July, also released its “Mortgage Servicing Examination Procedures” manual on Thursday. “We want the companies we supervise to know what we expect. These expectations are not new — most of them we inherited from the seven different federal agencies that handed consumer financial protection duties to us on July 21, when we officially opened,” Date said.
Daily Briefing | Thursday, October 13, 2011
Credit Suisse Could Shut Down CMBS Origination Unit
Credit Suisse is making plans to possibly shut down the origination side of its commercial mortgage-backed securities business, according to a person familiar with the situation.
MetLife May Sell Mortgage Unit Too
Three years after making a big splash in mortgages and then growing its business to become the 12th largest in the U.S., insurance conglomerate MetLife is now throwing in the towel on residential finance.
HUD Suspends Former LendAmerica Chief, Criminal Probe Continues
The Department of Housing and Urban Development late Wednesday said it suspended former LendAmerica president Michael Primeau from conducting any business with the agency after his admission that he engaged in a “wide-scale mortgage fraud scheme.”
JPM Posts Gains in Retail Lending, Correspondent
JPMorgan Chase Co. reported increases in retail and correspondent residential lending in the third quarter with pre-tax production income rising more than 70% on a sequential basis.
Mortgage Rates Rebound from Record Lows
Mortgage rates are rising from their historical lows of the past few weeks.
Former Regulator Wants FHLBs to Pay for Explicit Guarantees
Congress should require the Federal Home Loan Banks to pay for an explicit government guarantee on their debt, according to a former GSE regulator and congressman.
Sabal Buys $153 Million Loan Portfolio
Sabal Financial Group L.P. of Newport Beach, Calif., this week acquired a $153 million portfolio of loans located in some of the hardest hit regions of the U.S.
Banks to Congress: Don’t Mess with the FHLB System
As policymakers inch slowly toward reforming the housing finance system, the Federal Home Loan Banks and their allies have a simple message to Congress: leave the system alone.
Homeowners Insurance on the Rise in the Golden State
The cost of homeowners insurance in California has risen nearly 7% from a year ago, according to an online insurance marketplace.