CFPB: Servicers are Using Failed Technology

Tech Sights BHSome mortgage servicers have violated the Consumer Financial Protection Bureau (CFPB)’s new servicing rules by continuing to use failed technology that has harmed consumers, according to a special edition supervision report issued by CFPB on Wednesday.

The Bureau reported violations due to deficient technology and process breakdowns as a result of numerous examinations of mortgage servicers since the CFPB’s new servicing rules went into effect in January 2014. The Bureau’s examiners found specific problems regarding loss mitigation and servicing transfers, according to the CFPB.

“Mortgage servicers can’t hide behind their bad computer systems or outdated technology. There are no excuses for not following federal rules,” said CFPB Director Richard Cordray. “Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally.”

According to the CFPB, mortgage servicers were experiencing problems due to bad practices and sloppy recordkeeping even before the crisis. The problem was exacerbated by the crisis as millions of borrowers fell behind and servicers were unable to keep up, according to the CFPB.

To address this problem, the CFPB enacted new mortgage servicing rules two and a half years ago that require servicers to keep accurate records, allow distressed borrowers access to servicing personnel, credit payments promptly, and to correct errors in the servicing file at the request of the borrower.  The new rules also contain protections for struggling homeowners. A servicer’s ability to comply with the CFPB’s new requirements are largely dependent on the servicer’s policies related to technology.

The report released on Wednesday includes supervision work completed by the CFPB’s supervision program between January 2014, when the new servicing rules were put in place, and April 2016. The CFPB’s examiners found that while some investors have made some investments as far as compliance with the new rules, those investments have not been sufficient across the marketplace. Consumers continue to be plagued as a result of this insufficient investment, according to the Bureau.

“Mortgage servicers can’t hide behind their bad computer systems or outdated technology. There are no excuses for not following federal rules.”

Richard Cordray, Director, CFPB

The examiners found that many servicers used outdated or deficient technology that posed risks to consumers—and that many servicers lacked the proper training to properly use their computer systems and software platforms.

The CFPB’s examiners reported that technological breakdowns or malfunctions resulted in servicers sending loan modification notices late, or resulting in those notices containing incorrect or deceptive information; and that the transfer of loans to servicers with incompatible computers systems sometimes resulted in the servicer getting the runaround or the servicer failing to identify and honor a modification that was already in place.

CFPB alerts institutions to concerns and outlines necessary remedial measures where the Bureau’s examiners found violations of the law or other significant violations or weaknesses.

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