CFPB outlines points with unlawful ‘junk charges’ by mortgage servicers

The Shopper Monetary Safety Bureau (CFPB) on Wednesday launched a special edition 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,” mentioned CFPB Director Rohit Chopra. “Our report describes a bunch of unlawful junk price practices that the CFPB has uncovered throughout the monetary companies 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“CFPB examiners have recognized outdated and new ways in which mortgage servicers try to run-up illegal charges which are charged to owners,” the CFPB mentioned in its announcement of the newest report.

These embody extreme late charges and costs for pointless property inspections.

“Mortgage servicers charged the highest late price quantity allowed by related state legal guidelines, even when owners’ mortgage contracts capped late price quantities under state maximums,” the CFPB mentioned.

The CFPB additionally described its findings associated to pointless property inspection charges, stating that mortgage servicers charged customers between $10 and $50 “for each property inspection go to to addresses that have been identified to be incorrect.

In line with the CFPB, “servicers continued to pay inspectors to go to the identified incorrect addresses and continued to cost customers for these visits.”

Servicers additionally collected cash for faux non-public mortgage insurance coverage (PMI) premiums that owners didn’t owe of their month-to-month statements, the CFPB mentioned.

As well as, the CFPB discovered that servicers didn’t waive charges for some owners getting into loss mitigation choices, particularly these outlined below the Coronavirus Help, Reduction, and Financial Safety (CARES) Act signed into regulation in 2020.

“CARES Act mortgage forbearance coated not solely a mortgage’s principal and curiosity but additionally stopped servicers from charging late charges through the interval of forbearance,” the CFPB mentioned. “The Division of Housing and City Growth (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 costs that accrued outdoors of forbearance intervals.”

However CFPB examiners discovered that some mortgage servicers failed to stick to the extra protections outlined by HUD and had charged owners late costs, charges and different penalties that ought to have been waived as a substitute.

“Failure to waive the late costs, charges, and penalties constituted substantial harm to customers,” the report states. “This harm was not fairly avoidable by customers as a result of they’d no purpose to anticipate that their servicer would fail to observe HUD necessities, and customers lacked affordable means to keep away from the costs. This hurt outweighed any profit to customers or competitors.”