MReport May 2019

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48 | TH E M R EP O RT SERVICING THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Servicer Supervision: 4 Problem Areas In the 18th edition of its Supervisory Highlights, the Consumer Financial Protection Bureau (CFPB) identified areas of supervisory activity at mortgage servicers, as well as how they responded. T he four areas included: "charging consumers unauthorized amounts," "misrepresenting pri- vate mortgage insurance cancel- lation denial reasons," "failing to exercise reasonable diligence to complete loss mitigation ap- plications," and "representing the requirements for foreclosure timeline extensions in Home Equity Conversion Mortgages." The report covers supervision between June 2018 and November 2018. The CFPB found that at least one servicer charged borrowers greater late fees than allowed by the mortgage note. The bureau identified "programming errors in the servicing platform and lapses in service provider oversight" as the causes for the overcharges. Servicers responded by iden- tifying affected borrowers to resolve the issue as well as chang- ing policies to ensure borrowers are not overcharged in the future. Second, the CFPB found mis- representations when responding to borrowers' requests for private mortgage insurance cancellation. When denying some borrowers' requests, servicers' sometimes misstated the reason for the denial. The CFPB explained that this is problematic because "bor- rowers receiving the incorrect denial reason may fail to address other eligibility requirements to obtain PMI cancellation." The servicers in question have altered templates and procedures to future cancellation denial notices to explain the "accurate denial reasons." Next, the CFPB said in its Supervisory Highlights that it identified cases where servicers did not exercise "reasonable diligence" in acquiring sufficient documentation to complete loss mitigation, as required by Regulation X. After approving short-term forbearance, the servicers identi- fied did not advise the borrower that further documentation was necessary to complete full loss mitigation procedures. After receiving notification from the CFPB, the servicers identified the affected borrowers and notified them about other loss mitigation options that could be possible with additional docu- mentation. The last mortgage servicing issue covered in the Supervisory Highlights dealt with Home Equity Lines of Conversion Mortgages (HECMs) in the case of a deceased homeowner. When a homeowner with a HECM dies, his or her successor must pay the loan balance in full if he or she wishes to keep the home, or the home will be foreclosed. Successors may, however, file for extensions on the loan balance. In some instances, succes- sors received notices specifying the documents necessary to file for an extension on the loan balance due but did not include a deadline for the documents. Alternately, some successors were not notified of all the documents necessary to file an extension. The CFPB clarified that it "did not find that this conduct amounted to a legal violation," but it could fall into the category of "a deceptive act or practice." After receiving notice from the CFPB about their HECM practices, servicers "planned to improve communication with successors, including specifying the documents successors needed for an extension and the relevant deadlines." In its Supervisory Highlights, the CFPB also reviewed a few of its own program developments that took place between June and November 2018. These included a joint statement with other government and finance organiza- tions explaining "that supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance."

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