NEW YORK (MainStreet) — The Consumer Financial Protection Bureau announced late last week it has begun examinations of mortgage servicers as part of its larger initiative to regulate the mortgage industry.
The examinations will initially focus on loans in default where consumers are struggling to make payments, but will widen into an investigation of the entire loan-modification application process.
Each CFPB examination will look into whether the servicer is providing information about alternatives to foreclosure that is clear, whether loans sent to foreclosure are properly reviewed and actually in default and whether the fees charged to delinquent borrowers are not duplicative or otherwise illegal.
The CFPB says it is looking into mortgage servicers, who are responsible for collecting payments from the mortgage borrower on behalf of the owner of that loan, since in the vast majority of cases consumers do not choose their mortgage servicer and mortgage servicing rights can be, and frequently are, bought and sold among servicers.
A senior official for the CFPB says a significant number of examinations are currently under way. The bureau has released an 800-page volume explaining how the examinations will be conducted, and is currently seeking feedback from industry officials and consumer advocates.
“Bank regulators didn’t do a good job in the past,” Ira Rheingold, the executive director of the National Association of Consumer Advocates, tells MainStreet. “We need someone with fresh eyes and a consumer protection perspective to look into the industry.”
Rheingold also says that while policy changes won’t happen overnight, new regulations aren’t as far away as the public might think, even without a confirmed CFPB director.
“The bureau can make still make rules if they are getting authorities transferred from other agencies,” Rheingold says. However, these examination procedures are being unveiled at a time when other pressures may force changes in the mortgage industry, he adds.
The Office of the Comptroller of Currency recently unveiled a new complaint review process for homeowners believing they were the victims of an improper foreclosure. There is also the ongoing probe by state attorneys general into the mortgage industry over the foreclosure document mess that has yet to be settled.