CFPB shares update on combating mortgage servicer ‘junk fees’

Improper late fees, inspection fees from servicers incur federal scrutiny

A new report published by the Consumer Finance Protection Bureau (CFPB) shared some of the agency’s recent findings on the mortgage servicing market, including some revelations from its ongoing scrutiny of “junk fees” charged by banks and other lenders.

Per its “Supervisory Highlights, Mortgage Servicing Edition” report, the CFPB noted that its examiners continue to find mortgage servicers assessing what it called “exploitative illegal fees,” including improper late fees and unnecessary property inspection fees.

Mortgage investors usually mandate a property inspection for accounts that have been delinquent for a set amount of time, with the costs of those visits then generally passed on to consumers. Not every loan is eligible for such inspections, however; Fannie Mae guidelines, for example, prohibit such inspections on mortgages if the property is owner- or tenant-occupied and the borrower is under a loss mitigation or bankruptcy plan. Fannie guidelines outline similar inspection prohibitions for loans under other specific conditions as well, but CFPB examiners found that servicers still charged property inspection fees on many such Fannie Mae loans.

“Hundreds of borrowers” were charged property inspection fees barred by Fannie Mae, the CFPB found, causing consumers “substantial injury.” A number of other borrowers were levied late fees that either exceeded the amount allowed in the loan agreement or shouldn’t have been charged because the borrower had entered into a loss mitigation program.

CFPB reviews also found other unfair or deceptive practices, including deceptive loss mitigation or delinquency notices, failures to make timely escrow account disbursements, inadequate descriptions of fees, and failures to waive fees following borrowers accepting loan modifications related to COVID-19. Servicers also violated several other loss mitigation provisions within Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA).

Findings in the report cover examinations completed by the CFPB from April through December of last year. In all of the above instances, the CFPB directed servicers to improve internal processes, as well as identify and remediate borrowers who were impacted, including refunding any borrowers who were charged improper fees. The report also states that the CFPB is currently reviewing Regulation X’s current framework to pinpoint possible ways to streamline mortgage servicing rules.

“Homeowners cannot just simply switch providers if their mortgage servicer charges them illegal junk fees,” said Rohit Chopra, director of the CFPB. “Since mortgage borrowers are captive to a company they never chose to do business with, we are working hard to detect and deter violations of law.”


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