Fair Housing Organization Critiques CFPB Servicing Rules

Shanna Smith said the National Fair Housing Alliance is disappointed that the CFPB did not completely eliminate dual tracking in its new mortgage servicing rules. Image: Fotolia

The Consumer Financial Protection Bureau’s new mortgage servicing rules were created to protect homeowners who are at risk of foreclosure, but one nonprofit fair housing organization thinks more could be done by the government agency.

Shanna Smith, president and CEO of the National Fair Housing Alliance, said the CFPB servicing rules do not preserve an important feature of the Home Affordable Modification Program which is the requirement to offer loan modifications that are beneficial to both the borrower and investor.

According to Smith, one of the main reasons why the current foreclosure crisis lingers is due to the servicers’ failure to respond to requests for help from troubled borrowers in a “timely, fair and consistent fashion.”

“Homeowners have no reason to believe mortgage servicers will act in good faith on their own,” she stated.

“As we have seen in the independent foreclosure review and the action of the attorneys general, mortgage servicers have repeatedly been negligent about processing documents submitted by homeowners and have failed to follow their own procedures for handling loan modifications and loss mitigation options.”

Smith said the organization is disappointed that the bureau did not completely eliminate dual tracking—the process where servicers move forward with foreclosure proceedings while borrowers are waiting to hear whether their loan modification request will be approved.

“Dual tracking is confusing to borrowers and has led to many foreclosures that could have been avoided,” Smith said. “In addition, the time limits for borrowers to submit loan modification requests and to appeal denials are too short, and do not reflect the realities that borrowers confront when facing foreclosure.”

For example, a quarter of African-American and Latino homeowners have either lost their homes to foreclosure, are currently in foreclosure, or are seriously delinquent on their home loans, Smith said.

“NFHA calls on the CFPB to revise the rules so that they strike a fairer balance between the needs of borrowers and the interests of investors,” Smith added.

“In addition, the CFPB and other regulators must address troubling fair lending programs in the mortgage servicing process, particularly removing the barriers faced by borrowers who are not proficient in English, or whose servicers refuse to make accommodations for borrowers’ hearing or vision impairments or other disabilities.”