RSSMortgage servicers charged homeowners illegal “junk fees” and engaged in other illegal practices, according to a supervisory highlights report from the Consumer Financial Protection Bureau.
Some servicers allegedly sent notices to financially-distressed homeowners stating they had been approved for repayment, when in fact no decision had been made and some were eventually rejected. Servicers also allegedly sent false notices to homeowners claiming they had missed payments and should apply for repayment. They also improperly rejected requests for assistance and to help evaluate struggling borrowers for repayment, both of which the CFPB requires.
Many servicers allegedly failed to waive penalties and late fees during covid as they used a streamlined process to finalize repayment options for struggling homeowners, according to the CFPB. “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,” according to the CFPB. “Servicers only took responsibility for those penalties for missed on-time payments if homeowners submitted complaints.”
Financial institutions have responded to the bureau’s work by refunding junk fees to borrowers and stopping illegal practices, according to the CFPB. The report spotlighted the bureau’s work to combat such fees. In October, the CFPB announced $140 million in customer refunds from February to August of 2023 “for unlawful junk fees” in bank account deposits, international money transfers and servicing auto loans.
“Homeowners cannot just simply switch providers if their mortgage servicer charges them illegal junk fees,” said CFPB Director Rohit Chopra. “Since mortgage borrowers are captive to a company they never chose to do business with, we are working hard to detect and deter violations of law.”
