Removing Barriers Blog

CFPB Highlights Concerns with Student Loan Servicing and Mortgage Servicing
Posted April 26,2017 by ManojBhoi

In addition to a string of recent enforcement actions, the CFPB today announced that its recent supervisory work has found that some student loan and mortgage servicers are violating consumer financial laws.

Concerns surrounding Student Loan Servicers included:

  • Routinely acted on flawed information: Most student loan borrowers have a right to postpone payments, called a deferment, while they are enrolled in school. But CFPB examiners found that one or more student loan servicers routinely acted on incorrect information about whether the borrower was enrolled in school.
  • Failed to reverse charges wrongly imposed on borrowers in school: Because of data errors, one or more student loan servicers routinely failed to reverse certain charges even after it knew it had wrongly ended a deferment. These charges included improper late fees and capitalization of unpaid interest, which occurs when interest that accumulates on a student loan is added to the principal balance.

Concerns surrounding Mortgage Servicing included:

  • One or more servicers failed to identify the additional documents and information borrowers needed to submit to complete a loss mitigation application to avoid foreclosure. They then denied the applications for not including those documents. Supervision directed these servicers to enhance policies, procedures, and monitoring to address the issue.
  • Prematurely launched the foreclosure process: Servicers cannot take certain steps toward foreclosure once they receive a complete loss mitigation application from a borrower more than 37 days before a foreclosure sale
  • Mishandled escrow accounts: One or more servicers used funds from escrow accounts to pay insurance premiums on unrelated loans.
  • Issued incomplete periodic statements: Servicers must provide regular statements that include the amount and due date of the next payment; a breakdown of payments by principal, interest, fees, and escrow; and recent transactions. Examiners found one or more servicers used vague language like “Misc. Expenses” and “Charge for Service” when describing certain costs.

CUNA is actively following and analyzing the CFPB’s Supervisory work, the increase in CFPB enforcement actions, and will update members about CFPB findings.