Got problems with the company that services your home mortgage — the one that collects your payments, keeps track of your escrow account and lets you know when you’re late?
So your monthly numbers don’t look right? You got blown off by servicing personnel when you tried to get inaccuracies in your account corrected?
Well, move over. You’ve got lots of grumpy company. As of Jan. 31, just under half of the 187,818 complaints filed with the federal watchdog Consumer Financial Protection Bureau concerned mortgage foul-ups, and the vast majority of these involved servicing, loan modification and foreclosure activities by servicers.
But sometimes the problems go beyond run-of-the-mill ineptitude. As part of its statutory functions, the CFPB sends investigators into the offices of mortgage servicing firms to check their accounts for evidence of what it calls “unfair and deceptive practices.” In their latest series of visits and supervisory audits, bureau auditors found shenanigans that might horrify unsuspecting homeowners:
● Abuses in mandatory cancellations of private mortgage insurance premiums. Servicers are required by federal law to stop collecting insurance premiums, which can run into the hundreds of dollars a month, once the principal balance on a mortgage reaches 78 percent of the original value of the property. But some servicers don’t follow the letter of the law. In one case, according to the CFPB, a servicer invented a requirement out of whole cloth — that premium payments could be canceled only if a loan was more than two years old. But there is no such requirement in federal law. Investigators also found cases where sticky-fingered servicers did not return excess mortgage insurance payments to the borrower within the 45 days that federal law requires.
● “Biweekly” mortgage payment plans that weren’t really biweekly. The biweekly payment alternative, which some servicers charge fees to set up, requires half a month’s payment every two weeks rather than a full payment once a month. Since there are 26 two-week periods in a 52-week year, payments properly credited to principal and interest biweekly can accelerate payoff of the loan and, over time, potentially saving the borrower thousands of dollars in interest charges. But CFPB investigators found that one company, which it did not identify, marketed deceptive biweekly payment programs to its mortgage customers. Rather than the promised biweekly crediting of payments, the servicer instead “submitted payments monthly and retained the extra money” in its own accounts until the end of the year, at which point it made an extra monthly payment. The net result was less beneficial for the borrower than promised.
● Poor reporting on loan accounts to the national credit bureaus. Though servicers have a legal responsibility to correctly report the payment status of their customers’ loans to the bureaus, investigators found that in some cases servicers misreported mortgages whose payments had been modified — lowered — by lenders as being in foreclosure. They also reported some short sales — where the lender agrees to accept less than the full amount of the debt owed and a new owner purchases the house — as foreclosures. Both types of erroneous reports cause devastating hits to borrowers’ credit scores.
● Abuses in transfers of servicing. Though complaints by consumers when their servicing is switched from one company to another have been commonplace for years, investigators found that some servicers mistreated customers whose loans had modified payment terms. Rather than honoring the modification terms, servicers insisted on independently determining that the lower payments had been offered “properly” — either on a trial basis or permanently — by the previous servicer. This produced needless delays and paperwork to torment homeowners.
But it’s not only the CFPB that is turning up servicing issues such as these. Kevin Stein, associate director of the California Reinvestment Coalition, says his group’s surveys of housing counselors suggest that servicers’ practices continue to pose serious problems, especially for non-wealthy homeowners, people of color, handicapped individuals and those who have sought or obtained loan modifications.
According to Stein, botched transfers of servicing appear to be an increasing source of pain for consumers, as are lost documents and so-called “dual tracking,” where servicers pursue foreclosures at the same time they are considering borrowers for a possible loan modification.
What should you do if your mortgage servicer gives you the runaround despite having seriously messed up your mortgage account? Consider joining the thousands of fellow owners who have filed complaints with the CFPB (www.consumerfinance.gov). Unlike other federal agencies, the bureau follows up on your complaint, contacts the servicer promptly and tries to mediate your dispute.
Ken Harney’s e-mail address is firstname.lastname@example.org.