WASHINGTON— The Consumer Financial Protection Bureau (CFPB) is continuing its focus on what it calls “junk fees,” with the release of a new Supervisory Highlights that describes its actions to combat such fees charged by mortgage servicers, as well as “other illegal practices.”
The CFPB said its examinations have found servicers charging illegal junk fees, such as prohibited property inspection fees, sending deceptive notices to homeowners, and violating loss mitigation rules that help struggling borrowers stay in their homes.
In response to its findings, the Bureau said financial institutions have refunded junk fees to borrowers and stopped their illegal practices.
“The mortgage servicing examination work announced today builds on prior CFPB exam work combatting junk fees in the mortgage servicing and other consumer financial markets,” the CFPB said in releasing its new Supervisory Highlights.
Funds Returned
As CUToday.info reported, in October 2023 the CFPB announced its examination work from February to August of 2023 resulted in $140 million refunded to consumers for unlawful junk fees in the areas of bank account deposits, auto loan servicing, and international money transfers. Since that time, the CFPB’s supervision junk fee work has resulted in more than $120 million in additional junk fee refunds in the area of bank account deposits, the CFPB said.
The Bureau noted residential mortgage servicers currently handle more than $13 trillion in mortgage balances.
The CFPB has also announced it is working to address other anticompetitive mortgage fees, including those charged in connection with closing costs.
Key Findings
According to the CFPB, key findings in its newest report include that mortgage servicers are:
- Illegally charging and obscuring fees. “Mortgage servicers charged homeowners prohibited and unauthorized fees. These included prohibited fees for property inspections and late fees that exceeded amounts allowed by their mortgage loan agreements. Mortgage servicers also failed to explain the reasons for fees by not describing them adequately on statements.”
- Keeping homeowners on the hook for fees during COVID-19. “During COVID-19, many servicers used a streamlined process to determine repayment options for struggling homeowners. Some servicers failed to waive late fees and penalties, as required.”
- Missing deadlines to pay property tax and home insurance. “Mortgage servicers that accepted or required money from borrowers to pay taxes and insurance failed to make those payments in a timely manner, which caused some borrowers to incur penalties. Servicers only took responsibility for those penalties for missed on-time payments if homeowners submitted complaints,” the CFPB said.
- Deceiving homeowners and failing to properly evaluate them for repayment options. “Some servicers sent notices to homeowners in financial distress that stated they had been approved for a repayment option,” according to the Bureau. “In fact, no final decisions had been made, and some of the homeowners were ultimately rejected. Examiners also found servicers sent some homeowners false notices saying that they had missed payments and should apply for repayment options. Servicers also improperly denied requests for help and failed to evaluate struggling borrowers for repayment options as required under the CFPB’s mortgage servicing rules.”
The Response
According to the CFPB, in response to its findings, mortgage servicers are taking corrective actions, including changes to their policies and procedures. For the fee-related findings, servicers are remediating homeowners, including providing refunds.
Read this edition of Supervisory Highlights.