When consumers outsource loan services to companies, they assume that the company will have their best interests (or any interests) at heart. Wrong. Too many servicing companies put their own interest above those of the consumers paying the bills.
The Consumer Financial Protection Bureau (CFPB) thankfully recognizes the problem and they are on the case. What they came up with is pretty vanilla, but it’s a start. Here’s the basics:
When handling loans, mortgage servicers should not lose paperwork, lose track of a homeowner’s loss mitigations plans or hinder a consumer’s chances of saving their home from unnecessary foreclosure.
Should not lose paperwork!? The fact that the CFPB had to formally advise mortgage servicing companies of this speaks volumes about the state of the industry: not good.
But it really does happen. The CFPB isn’t saying, “be careful” or “watch out”, they are saying: stop doing this. The CFPB’s bulletin (issued February 11, 2013) is addressed to residential mortgage servicers and puts them on notice that the CFPB may require a mortgage servicer to submit an “informational plan” describing how they will manage risk. (Come on people, no more losing paperwork!) As a homeowner, can you imagine watching the financial stability of your house being shaken by untrustworthy companies that you didn’t even choose? Well, then watch out for the signs, and don’t be a victim.
“Collateral damage.” That is what CFPB Director Richard Cordray labels homeowners whose mortgages have been mishandled by service providers.
A couple of bad outcomes come out of the great state of California. By entering into agreements with real estate brokers that offered a fee in exchange for their exclusive use of Fidelity-owned TransactionPoint services, such as title and escrow, Fidelity took that choice away from whom it properly belongs – the consumer. This was a violation of federal law that forbids companies from issuing fees or kickbacks during a home purchase. While a relatively subtle form of fraud, Fidelity was trying to exploit consumers to increase their revenue – not ok in my book (or the federal government’s book for that matter).
Another California mortgage servicer took a more direct route to making money – outright fraud. A mortgage “company” (in this case a scam company) by the name of North Bay Trust Services convinced Californian homeowners to “pay upfront fees of between $1,000 and $10,000 with an eye to eliminating mortgage debt” as told by lawyersandsettlements.com.
While North Bay was purely a scam, an alert consumer would have been tipped off by its request for up-front fees: in California, charging up-front fees is illegal. So consumers, make sure you know who exactly is servicing your mortgage and when something looks or sounds fishy, ask questions.
With Americans beginning to increase buying in the housing market, let’s hope the CFPB’s advisory bulletin will have some effect and serve as a warning to companies to not repeat the same practices we saw in the 2007 housing market (shortly followed by crises). Hopefully, we can prevent consumers from being “collateral damage” when taking out a mortgage.
Have you been the victim or a fraud or a scam? Have you been harmed as a consumer? Call Berk Law at (202) 232-7550 to discuss your legal rights.