CFPB warns servicers of wronging abuse victims, successors

The Consumer Financial Protection Bureau is warning servicers about their bad behavior toward borrowers following deaths, divorces or domestic violence issues. 

Servicers have pushed those borrowers to unnecessarily refinance at higher interest rates; failed to modify their loans; and have put domestic violence survivors at risk, the regulator reports. The Bureau is urging investors and guarantors to review their policies, but didn't name alleged offenders nor suggest any penalties. 

"When someone loses a spouse or goes through a divorce, the last thing they need is their mortgage servicer giving them the runaround or pushing them into an unaffordable loan," said Rohit Chopra, CFPB director, in a press release. "Mortgage servicers have clear obligations under federal law to help these homeowners."

Dozens of homeowner complaints between December 2021 and August 2024 highlighted the stress, financial uncertainty and incredulity over servicers' actions, or in many cases, inactions. Federal rules require servicers to deliver information to successor homeowners and process assumptions if the homeowner is qualified, the CFPB reiterated. 

"It's unacceptable that anyone would target surviving spouses in their time of need," said Joshua Jacobs, undersecretary for benefits at the Department of Veterans Affairs, in a press release.

The VA mandates qualified surviving spouses should be able to assume loans of deceased veterans without further delay, he said. Homeowners reported problems in processing assumptions with mortgage companies for their government-backed loans, with servicers delaying paperwork, denying qualified borrowers and pushing refis. 

Servicers don't take responsibility for their "shoddy" customer service, the CFPB wrote. Instead they blamed investor requirements, processing volumes or "systems issues."

The complaints cover the time when rates were in the 3% range. Borrowers gripe that the improperly pushed refis are untenable as rates have since soared to nearly 7%.

"This is coercive, and deprives me of my rights under federal law," wrote one unidentified borrower of a company providing inconsistent explanations for deficiencies in a post-divorce assumption. 

Servicers reportedly repeatedly requested paperwork and took years to process it, costing homeowners legal fees, and putting them at risk of violating divorce decrees and delinquencies. Domestic violence survivors also reported servicers sending account information to their abusers and requiring their abusers' consent for account changes, putting their mortgages, and safety, at risk. 

The report reminds servicers to examine whether their underwriting requirements pose undue obstacles to assumptions when successors are qualified. It also asked investors and guarantors to develop policies with services to protect domestic violence survivors. 

For consumers, the CFPB urged them to file a complaint, while the VA asked affected consumers to contact their local VA Regional Loan center. 

The CFPB received around 28,000 mortgage-related complaints in 2023, with the majority of them regarding payment troubles. Most complaints were resolved with explanations, with just 2% being settled with monetary relief. 

In the past year the Bureau has mulled action regarding mortgage servicers in weighing junk fees and proposing a larger loss mitigation overhaul. It's also taken disciplinary action against mortgage players for other alleged bad behavior, including dual tracking and redlining.