The Shopper Monetary Safety Bureau (CFPB) on Wednesday launched a particular version of its Supervisory Highlights report that profiles “illegal junk charges uncovered in deposit accounts and in a number of mortgage servicing markets,” together with amongst mortgage servicers.
“For years, junk charges have been creeping throughout the financial system,” stated CFPB Director Rohit Chopra. “Our report describes a bunch of unlawful junk payment practices that the CFPB has uncovered throughout the monetary providers sector.”
A November 2022 Supervisory Highlights report described how “unlawful charges [are] being charged within the mortgage servicing market,” which led to an enforcement motion in opposition to a mortgage lender for what the CFPB referred to as “improper” forbearance practices.
“CFPB examiners have recognized outdated and new ways in which mortgage servicers try to run-up illegal charges which might be charged to owners,” the CFPB stated in its announcement of the most recent report.
These embrace extreme late charges and charges for pointless property inspections.
“Mortgage servicers charged the highest late payment quantity allowed by related state legal guidelines, even when owners’ mortgage contracts capped late payment quantities beneath state maximums,” the CFPB stated.
The CFPB additionally described its findings associated to pointless property inspection charges, stating that mortgage servicers charged shoppers between $10 and $50 “for each property inspection go to to addresses that had been recognized to be incorrect.
In line with the CFPB, “servicers continued to pay inspectors to go to the recognized incorrect addresses and continued to cost shoppers for these visits.”
Servicers additionally collected cash for pretend personal mortgage insurance coverage (PMI) premiums that owners didn’t owe of their month-to-month statements, the CFPB stated.
As well as, the CFPB discovered that servicers did not waive charges for some owners getting into loss mitigation choices, specifically these outlined below the Coronavirus Help, Aid, and Financial Safety (CARES) Act signed into legislation in 2020.
“CARES Act mortgage forbearance lined not solely a mortgage’s principal and curiosity but in addition stopped servicers from charging late charges in the course of the interval of forbearance,” the CFPB stated. “The Division of Housing and City Improvement (HUD) put additional protections in place for owners that exited forbearance and went into everlasting COVID-19 loss mitigation choices, together with waiving sure charges or different expenses that accrued exterior of forbearance durations.”
However CFPB examiners discovered that some mortgage servicers failed to stick to the extra protections outlined by HUD and had charged owners late expenses, charges and different penalties that ought to have been waived as a substitute.
“Failure to waive the late expenses, charges, and penalties constituted substantial harm to shoppers,” the report states. “This harm was not moderately avoidable by shoppers as a result of they’d no motive to anticipate that their servicer would fail to observe HUD necessities, and shoppers lacked affordable means to keep away from the costs. This hurt outweighed any profit to shoppers or competitors.”