The bureau said it's found problems with certain property inspection charges, fees that loan mods should eliminate and improperly labeled line items, according to its latest Supervisory Highlights report.
CFPB Director Rohit Chopra spoke about the crackdown on mortgage fees Wednesday on a White House press call to discuss the Biden administration's efforts to eliminate
"Our CFPB oversight goes on site to these mortgage servicers and we found all sorts of illegal junk fees, prohibited property inspection fees, deceptive notices to homeowners violating loan modification rules for struggling borrowers," Chopra said on call with reporters that was
"We really hope that our reforms in these markets are going to lead to more fair and competitive pricing," he continued. "I also think it's going to restore a little bit of trust that people really need in the banking system, because they're really tired of all of this fee creep across the economy."
What follows are more details about the fees the bureau has been cracking down on and some other related concerns the CFPB identified in examinations between April and December of last year.
Charges for excessive inspections
If a borrower has gone too long without making a payment, inspections often are supposed to occur, and servicers who pay for them may charge fees to consumers in certain instances.
But there are some exceptions within major government-related mortgage investor Fannie Mae's guidelines where inspections should not occur. The bureau said it found those exceptions ignored in some cases.
"In total, servicers charged hundreds of borrowers fees for property inspections that were prohibited," the CFPB said
There are exemptions if there's right-party contact or a full payment made in the last 30 days, a performing loss mitigation option or bankruptcy plan, according to the bureau.
Failure to provide loss mitigation relief
When a delinquent borrower enters an agreement on a foreclosure alternative, the servicer is generally supposed to stop charging late fees. In the case of rules for COVID-19 modifications under Regulation X, servicers must waive some past charges.
The bureau said it found some servicers weren't following these directives.
Generic itemization
Citing rules in Regulation Z calling on servicers to provide "a brief description of the transaction" in billing statements, the CFPB said it called on some mortgage companies handling consumer payments to be a little more descriptive when they itemized charges after finding some weren't.
To get an idea of what's not acceptable to the bureau, consider its description of one instance in which it reportedly found "the general label 'service fee'" used to correspond with "18 different fee types."
Escrow issues
The bureau also said it ran into issues with servicers not distributing money from escrow accounts in a timely way. That's something that's supposed to be done under Reg X so long as consumers aren't more than 30 days late.
"Examiners found servicers attempted to make timely escrow disbursements, but the payments did not reach the payees. The servicers did not resend the payments until months after," the bureau said.
That led to late fees that the bureau found "servicers only reimbursed after the borrowers complained."
Communication and records retention
The CFPB also mentioned issues around borrower contact and reporting in its report, some of which could lead to improper fees.
The bureau showed concern that some notifications servicers are supposed to provide to borrowers approved for expedited foreclosure prevention or alternatives broke rules against unfair and deceptive practices.
Some borrowers reported as approved actually hadn't been, according to the CFPB.
The bureau also found that other notices improperly indicated delinquency in cases where they shouldn't have because borrowers either had made all their payments, were testing a modification plan or had an "inactive" loan due to a payoff or short sale.
The bureau also flagged shortcomings in notifications required under Reg X.
These notifications are supposed to acknowledge receipt of loss mitigation applications, indicate if they are complete or not and provide timely information on deadlines for accepting offers, but instead they were missing this information.
Other Reg X violations included following through with or documenting timely, good-faith, live customer contact that is supposed to occur within the first 36 days a payment is late.
A similar concern was reported regarding "early intervention notices" that are supposed to be sent within the first 45 days borrowers are late on obligations "and against every 180 days thereafter."
Finally, the CPFB also found that servicers in some cases failed to retain documentation that's supposed to be held for a year after a loan discharge or transfer.
Kate Berry contributed reporting to this story.
