In 2021, we’ve seen many promising signs that the economy is reopening and recovering, including lower unemployment and more household spending. At the same time, our recovery remains fragile, and millions of families continue to struggle to afford their mortgage payments.
Through our supervision of the financial marketplace, we spot potential bad actors and help families avoid unnecessary hardships and errors that could result in financial harm. During the pandemic, we’ve closely monitored mortgage servicing companies as over 7 million homeowners entered forbearance programs to defer their monthly payments. A recent report revealed numerous violations of consumer protection laws, including those put in place to help families impacted by the financial crisis.
If you’re still struggling to make your mortgage payments, you’re not alone. It’s important to know, though, that you have rights and options. While your mortgage servicer should be working with you to provide all of the repayment options available to you, you have additional resources, if you need them, to get answers and help in order to make the best decision for your situation.
Mortgage servicing violations
Due to the increase of homeowners needing assistance this year, we’ve prioritized supervision of mortgage servicers. A recent review of our 2021 supervision efforts revealed certain violations, including:
- Charging late or default-related fees to borrowers in CARES Act forbearance programs. The CARES Act generally prohibits a servicer of federally-backed mortgage loans from imposing these fees while a borrower’s mortgage payments are being deferred due to financial hardship caused by the COVID-19 emergency.
- Failing to end preauthorized electronic fund transfers. Otherwise known as EFTs, some servicers failed to end automatic electronic payments when an account had been closed, often resulting in additional and repeated fees when borrowers had insufficient funds in their banking account.
- Charging consumers unauthorized amounts. Our report found that, in some cases, mortgage servicers overcharged borrowers for services or added fees outside of their loan terms, including for home inspections and Broker Price Opinions.
- Misrepresenting mortgage loan transactions and payment history in online accounts. Examiners found that servicers provided inaccurate descriptions of payments and transaction information, which may have misled borrowers.
- Failing to review borrowers’ applications for loss mitigation options within 30 days. Examiners found that mortgage servicers violated Regulation X because the servicers didn’t evaluate the borrowers’ complete loss mitigation applications and provide a written notice stating the servicers’ determination of available options within 30 days of receiving borrowers’ applications.
- Incorrect handling of partial payments. Servicers are required to take one of the following specific actions when they receive a partial payment from a borrower: crediting the payment, returning it to the consumer, or holding it in an unapplied funds account. Examiners found that, in some cases, servicers put these payments in borrowers’ escrow accounts rather than returning the amount or crediting it to borrowers’ next monthly payment.
- Failing to automatically terminate Private Mortgage Insurance (PMI) on time. For borrowers with PMI, servicers are generally required to automatically terminate those additional PMI payments once the mortgage loan’s principal balance is first scheduled to reach 78 percent of the original value of the property. Examiners found that in many cases the servicers’ data was inaccurate, and the PMI wasn’t terminated in a timely manner.
CFPB worked to protect consumers
In response to our findings, mortgage servicers that violated the law – often due to human or technical errors – provided remediation to the impacted borrowers, improved the accuracy of their information, increased staffing to handle demand, and changed their practices.
Help for homeowners
If you’re a homeowner who is struggling financially, you may have several options available to you.
Most homeowners have the option to temporarily pause or reduce their mortgage payments through forbearance programs if they’re unable to make their mortgage payments. While your payments are not erased or forgiven, you should have the option to repay them over time, when you refinance your loan, or when you sell your home.
If you’re currently exiting a COVID-19 forbearance program and ready to restart making mortgage payments, mortgage servicers are required to work with you and tell you about all available options for avoiding foreclosure.
Regardless of your situation, we have housing tools and resources to help you understand your options.
Getting additional help
There may be situations where you need additional support to find the answers or help you need, or to get a response from your servicer.
- Talk to a housing counselor. A local HUD-approved housing counselor can help provide you with a tailored plan of action and help you work with your mortgage company, at no cost to you.
- Speak with a lawyer. You may also qualify for free legal services in your community, if you need additional help and legal advice.
- Submit a complaint with the CFPB. If you’re having difficulty with your mortgage servicer, submit a complaint and we’ll work to get a response. Complaints also provide valuable insight into potential risks and issues in the marketplace.