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Financial Services Law Insights and Observations

CFPB Releases Supervisory Highlights Focused on Student Lending and Mortgage Servicing

Lending CFPB Student Lending Mortgages Loss Mitigation


On April 26, the CFPB released its Supervisory Highlights for spring 2017, which outlines its supervisory and oversight actions in areas such as mortgage servicing and student loan servicing.  According to the Supervisory Highlights, recent supervisory resolutions have “resulted in approximately $6.1 million in restitution to more than 16,000 consumers.”

Student loan servicing. Bureau examiners reported that student loan servicers (i) routinely acted on incorrect information about whether the borrower was enrolled in school, and (ii) failed to reverse certain charges, including improper late fees and capitalization of unpaid interest, even after they knew they had wrongly ended a deferment.

Mortgage servicing. According to the report, the Bureau continued to see “serious issues for consumers seeking alternatives to foreclosure, or loss mitigation, at certain servicers.” CFPB examiners found problems with premature foreclosure filings, mishandling of escrow accounts, and incomplete periodic statements. Furthermore, examiners found that one or more mortgage servicers:

  • failed to identify the additional documents and information borrowers needed to submit to complete a loss mitigation application and then denied the applications for not including those documents;
  • launched the foreclosure process prematurely after receiving loss mitigation applications from borrowers, thereby failing to give required foreclosure protections to qualified consumers;
  • mishandled escrow accounts by using funds to pay insurance premiums on unrelated loans, creating shortages in the escrow accounts and higher monthly payments for consumers; and
  • issued incomplete periodic statements that used vague language such as “Misc. Expenses” and “Charge for Service” when describing transaction activity.

The report also outlined the Bureau’s position on employee production incentives and presented guidance and examples of where “incentives contributed to substantial harm.”

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