CFPB: Mortgage Servicers Must Send Periodic Statements to Homeowners

The Consumer Financial Protection Bureau said Friday (Jan. 17) it is monitoring the market to ensure that mortgage servicers don’t attempt to evade federal consumer financial laws.

The regulator is doing so after sending information requests to mortgage servicers and finding that some of these companies failed to send periodic statements to homeowners whose loans accrued interest and fees and were subjected to collections activity, that most of these loans are concentrated among a few servicers, and that most of these loans last posted a payment in 2015 or earlier, the CFPB said in a Friday blog post .

The CFPB has dubbed these second mortgages that still exist even though consumers thought they were forgiven or satisfied long ago, “ zombie second mortgages ,” according to the release.

“As home prices have increased and homeowners have paid down their first mortgages, some are facing foreclosure notices and payment demands from companies claiming to own or otherwise having the right to collect on these second or so-called zombie mortgages,” CFPB Supervision Director Lorelei Salas wrote in the post.

The regulator continues to receive consumer complaints about these loans, with some saying they are facing collection efforts and foreclosure actions after years passed without their receiving communications from servicers about the loans, according to the post.

As it monitors the market, the CFPB is focusing in part on mortgage servicers’ compliance with the Truth in Lending Act and the Real Estate Settlement Procedures Act and their implementing regulations, the post said.

These regulations generally require mortgage servicers to provide homeowners with periodic statements and notices of ownership and servicing transfers, to do so even after charging off a loan, and to make ongoing good faith efforts to establish live contact with delinquent homeowners, per the post.

In an earlier, separate report, the CFPB said in April that it was targeting “junk fees” in the mortgage industry after finding that mortgage servicers charged illegal fees, sent deceptive notices to homeowners and violated loss mitigation rules that help struggling borrowers keep their homes.

The regulator said in its April 24 report that it found mortgage servicers charging homeowners unauthorized fees for things like property inspections and late fees that exceeded amounts on their loan agreements.