Top CFPB Official Vows to Crack Down on Mortgage Servicers

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WASHINGTON No more Mr. Nice Guy.

That was the message that the Consumer Financial Protection Bureau's No. 2 sent to mortgage servicers attending an industry conference on Wednesday. Steven Antonakes, the agency's deputy director, said that servicers have had more than a year to prepare for a reform rule that took effect last month and suggested the CFPB would move quickly and harshly against violators.

Antonakes acknowledged that the agency has previously suggested it would be tolerant of mortgage servicing companies so long as they were making a "good-faith effort" to comply with the rule, but he warned that such allowances only extend so far.

"A good-faith effort, however, does not mean servicers have the freedom to harm consumers," Antonakes said. "It has felt like 'Groundhog Day' with mortgage servicing for far too long. Please understand, business as usual has ended in mortgage servicing. Groundhog Day is over."

Antonakes' speech was a clear sign that the agency has shifted from its previous message of forbearance to a more hard-line stance regarding the mortgage servicing rule, which went into effect Jan. 10. (The speech was limited just to servicing, and did not appear directed at bankers still seeking to comply with other new regulations, such as the 'qualified mortgage' and 'ability to repay' rules governing underwriting.)

"My message to you today is a tough one," Antonakes said in prepared remarks before the Mortgage Bankers Association's national mortgage servicing conference in Orlando, Fla. "I don't expect a standing ovation when I leave. But I do want you to understand our perspective."

The new mortgage servicing rule requires clearer monthly statements and stricter timelines in responding to borrowers. It also bans servicers from dual tracking loan modifications and foreclosure procedures, as well as using force-placed insurance as a regular practice rather than a last resort.

Antonakes defended the rule, saying servicers have had months to bring themselves into compliance and that the agency has made changes in response to industry complaints.

"Servicers have had more than a year now to work on implementation," Antonakes said. "We put out plain-language summaries of the rules and posted video guidance. In addition, as we became aware of critical operational or interpretive issues with our rules, we addressed them."

The speech also made it clear that CFPB officials are frustrated with the mortgage servicing industry's lack of progress in cleaning up its mistakes. It is still widely regarded as rampant with issues, including poor documentation practices, wrongful foreclosures on homeowners and resale problems that make it nearly impossible for borrowers to track down their loan.

More than five years after the financial crisis, Antonakes noted, one in 10 homeowners are still underwater on their mortgages and that "two million households are at high risk of foreclosure."

"Nearly eight years have passed and I remain deeply disappointed by the lack of progress the mortgage servicing industry has made," he said. "In fairness, there have been some improvements. Since 2007 nearly 6.8 million loans have been modified. But despite these advances too many customers continue to receive erratic and unacceptable treatment. Our nation's mortgage servicers manage a debt portfolio of nearly $10 trillion for millions of American homeowners. This kind of continued sloppiness is difficult to comprehend and not acceptable. It is time for the paper chase to end."

Antonakes said the CFPB would be paying "exceptionally close attention" in making sure servicers send all the information and documents of a loan when it's transferred to another servicer.

"We're going to hold you to that. Servicing transfers where the new servicers are not honoring existing permanent or trial loan modifications will not be tolerated," he said. "There will be no more shell games where the first servicer says the transfer ended all of its responsibility to consumers and the second servicer says it got a data dump missing critical documents."

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Comments (5)
DEAR Steven Antonakes,,

I don't mean to be rude, but really? Who is this article geared toward? Is it a belated Valentine to the servicers...some kind of inside joke?

Please address the issues I have with the following statement:
"it would be tolerant of mortgage servicing companies so long as they were making a "good-faith effort" to comply with the rule, but he warned that such allowances only extend so far."
1. The CFPB is progressing toward "tolerant" from turning a blind eye or "having hands tide" toward the servicer violations? Or has the CFPB been swayed enough to say, "they really are sheep?" The CFPB knows full well that the "good-faith effort" presumption is rebuttable and in fact a very bad regulating standard for "fairness to borrowers." This standard should not even be a prima fascia statement. Where's the proof?

I think the CFPB needs to make a change like the Bankruptcy code did in 2005.
Basically, from what I understand, the BAPCPA's biggest change was, "the presumption of abuse." Unfortunately, also from what I understand, this presumption is geared toward the debtor. Albeit possibly true when the change came about, now this presumption should be geared toward servicers.

From my experience personally and with thousands of borrowers and cases, it's time for a CFPB-CPA. WOW, do you mean to tell me that the CFPB is not aware that the servicers know they have the CFPB wrapped around their fingers and they know just what to say and who to pay? Or is it just the everyday common tax-payer that is in the dark?
Everything in this article sounds good. Believable? Hardly.
Be assured, at this very moment there are borrowers I know personally who can not get the same answer regarding the servicing of their loan. After up to two hours on the phone being transferred to the right department, it turns out that department is never reached, rather 9 times out of 10 the ultimate transfer leads to the queue as a brand new caller or a dial tone....OOOOPS! Mental torture seems to be blessed by the cfpb.

The changes by the CFPB has been good for a few of the lawyers and those who can afford representation and haven't decided to waive the white clad and decide, it isn't worth your family, health, spirit, liberty and life.
With that being said, there still are no consumer advocate agencies...take reports, pass on to servicer, servicer says whatever they want and their own documents and words conflict...but hey...last bash on the head to knock the consumer out of the "fair" game is the cfpb stating case closed because the servicer said so. I'm physically sick over this article, "good faith effort?" REALLY???? BECAUSE THEY SAY SO??? I'll quit before I say what cfpb knows is the truth and coming from me would be the same hearsay...though I do have authenticated proof over what is really going on between servicers and cfpb, occ, etc Do you? Mr. Number 2 CFPB?
PLEASE RESPOND
Posted by really? | Thursday, February 20 2014 at 3:05AM ET
Promises, promises. After a decade of 'willful blindness' towards the nefarious activities of large financial institutions that resulted in the 2d worst economic disaster in US history, it is long-past time for federal financial regulators to stop pretending to enforce regulations - and start doing it. Apparently the only people fooled by the 'shell game' of the Too Big To Behave Banks off-loading the servicing operations covered by the $26 billion national settlement to non-bank servicers were federal regulators AND the federal monitor. Meanwhile, homeowners continue to suffer and no one is held accountable. Just like with the Financial Crisis. Now that several state attorneys general are trying to step in where impotent federal regulators have feared to tread - Mr. Antonakes says he's going to get tough. Tick tock.
Posted by jim_wells | Thursday, February 20 2014 at 9:47AM ET
"More than five years after the financial crisis, Antonakes noted, one in 10 homeowners are still underwater on their mortgages and that "two million households are at high risk of foreclosure."

Stupid is as stupid says. I am clueless as to how sending appropriate statements and prohibiting dual tracking will help underwater houses become suddenly liquid? I'm still baffled as to why commenters are so willing to obviate those who took a loan they couldn't actually afford. Sure, big banks took advantage, but so did those who continually re-financed their houses, cashing out as their equity increased. Those who bought houses and never refinanced, and those who took their equity and put it in future purchases are generally back into an equity position (and I live in Las Vegas, the worst-hit housing market in the country.) I am back in equity position (30% increase over last two years). Those who cashed out get no sympathy from me and properly servicing a loan will not solve this problem. Its the same same...too little, too late, and the wrong solution.
Posted by mmckelleb | Thursday, February 20 2014 at 11:11AM ET
I was never contacted regarding my complaint. I remember I was pleased you had set up your database, and as soon as I heard about it, within days I was online writing out my complaint. No one ever contacted me to discuss what happened to me. My originator was Advance Mortgage in Nov. 1993, my loan was sold to Waterfield Mortgage in Nov. 1993, I had a perfect mortgage payment history with Waterfield until they went out of business and sold my note to Wells Fargo in Nov. 2004. I had one golden year with Wells Fargo, until they (all one their own) paid my property taxes (twice, 11-19, 11-23) and paid my property insurance (when I'd already paid these on my own) and the result was a negative escrow balance that tripled my monthly payment!

I lived on SSDI. Wells Fargo knew I wouldn't be able to pay it. From the moment I'd discovered my mortgage payment tripled, (mind you, over a month prior they had already been paid back for their overpayment of my property taxes by Johnson County, Kansas, I was constantly in contact with Wells Fargo asking when they would correct my mortgage balance.

They did acknolwedge the problem, apologized, promised it would be corrected very soon, but asked me not to send in a payment because they would have to return it as they can not accept a "partial" payment on an account until it is corrected.

This UNBELIEVABLE SAGA went on, back and forth, highs and lows, from January 2007 thru August 2007. I am sparing you many details, three months I was hospitalized, but throughout Wells Fargo convinced both me, and my twin sister (she represented me while I was hospitilized) were working to correct their error, and all they were doing was pushing me towards foreclosure. I didn't even know they were in Court because I was in a hospital in New Orleans when they received my foreclosure judgment. I didn't know anything until I came home, my locks were changed, my house was empty. I had a locksmith come back and change the locks. I didn't have any idea why the box was on the door, I thought it had to do with the fact I'd had a realitor showing it. I talked with Wells Fargo Presidential Office throughout September and October with Sharon Cecil, and others, and they were apologetic and immediately (even after they received the foreclosure judgment in August) corrected my mortgage balance back to the $59,000 I had owed before their errors, and they told me they were putting together a new mortgage package for me. Once again they told me to wait before I sent in November's payment - or they would have to return it, because they had to get everything on my account corrected. This time I didn't believe them. I kept calling. I watched the internet. Late November Wells Fargo put my home back on the Sheriff's sale list. I called them frantic. WHY? They took it off -- an accident they claimed. Then in the 3rd week of December they put it back on for a sale in January 2008. This time they sold it. Why would they lie about it? Someone told me they lied to prevent me from claiming bankruptcy. I have recorded (legal in KS) many of the conversations I had with the people servicing my mortgage at Americas Servicing (Wells Fargo's dirty little servicing secret) and the people at Wells Fargo's Presidential Office. Wells Fargo promised (by letter, I still have the letter) to contact the credit repositories, to correct the incorrect negative reports they had made. My credit score drop over 200 points! I had worked so hard to increase my score to 740 and now my score is 545. I desperately need help from the CFPB!

Kelly L. Hansen
http://wfhmcaught.blogspot.com/
Posted by Kelly L. Hansen | Thursday, February 20 2014 at 3:37PM ET
It might be helpful to keep in mind that this was another road to hell paved with good intentions. Before the real estate markets imploded in 2007, lenders and syndicators sought to keep servicing costs down and save borrowers money by selling servicing to the lowest bidders. Servicing became a scale business and companies had to automate and build high volumes to compete. Those systems were not designed to handle a large number of troubled loans or irregular payments and became overloaded when the downturn began. That led to robosigning and lost loans. Cleaning up those problems has been difficult because servicing fees are fixed from the outset and servicers don't get paid extra for dealing with problems. I mention that as an explanation, not an excuse. The servicers contracted to provide the services at those fees and should meet their obligations but regulators and critics should consider that part of the problem is the broken economics of servicing when there are a large number of troubled loans and what would happen if a large servicer just quit or became bankrupt and stopped servicing leaving the buyers and loan owners to fend for themselves. Remember, a servicer only provides a service. It does not own the loan and has no economic reason to keep providing the service at a loss. I was a regulator when there were stand alone servicing companies that had financial difficulties and it was a much bigger mess than now. Since the CFPB has an unlimited and unregulated budget, perhaps it could set up a servicing operation to buy troubled loans from the current servicers. CFPB could collect the contractual fees and subsidize the rest of the cost of building a servicing operation that would have the resources to give individual attention to each troubled borrower.
Posted by gsutton | Friday, February 21 2014 at 3:55PM ET
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