“Lack of an effective compliance management system has, in a number of instances, resulted in violations of federal consumer financial laws,” according to a new CFPB report on its examinations of bank and nonbank servicing shops over an eight-month period ending in June.
The consumer bureau expects the servicers to fix their compliance management systems. Going forward, they will be expected to conduct periodic monitoring reviews and pay for independent compliance audits.
“Today’s report highlights both the mortgage servicing problems throughout the industry and the challenges of making sure that nonbanks are following federal law. Fixing both is a priority for us,” said CFPB director Richard Cordray.
The examiners also found servicers fell short in their responsibly to help struggling borrowers via loan modifications or other loss mitigation options.
“In all cases where CFPB found mortgage servicing problems, examiners alerted the company and specified necessary remedial actions,” the bureau said in a press release Wednesday.
In one shop, CFPB examiners found problems with servicing transfers where a receiving servicer claimed the documents were not properly labeled or organized. So it ignored documents relating to applications for loss mitigation.
The CFPB directed the servicer to review the documents to determine if they can be “used in loss mitigation efforts and that the documents are stored and organized properly,” the report says.
The examiners also found a servicer that paid certain property taxes late in violation of RESPA. In another case, they found excessive delays in processing borrower requests for cancellation of their private mortgage insurance.
“Our examinations of banks and nonbanks allow us to correct problems before more consumers are affected,” Cordray said.
In some cases, the CFPB opened investigations for potential enforcement actions.