In a Feb. 19 speech before the nation’s largest association representing real estate finance, Steven Antonakes, Deputy Director of the Consumer Financial Protection Bureau (CFPB), updated the Bureau’s recent achievements before addressing how new mortgage servicing standards will be implemented.
Since CFPB began operations, the Bureau has:
• Returned more than $750 million to consumers as of September 2013 and issued fines totaling $81.5 million to entities that violated consumer laws;
• Mandated an additional $2 billion in foreclosure relief; and
• Received more than 289,000 complaints. An average of 4,900 mortgage complaints per month is second only to the 5,900 average filed on debt collection.
Yet, the real focus of Antonakes’s address focused on mortgage servicers. He said, “When it comes to servicing, consumers have little choice in the matter. After a borrower chooses a lender and takes on a mortgage, the responsibility for managing that loan can be transferred to another servicer without any so-so from the borrower. So if consumers are dissatisfied with their servicer, they have no opportunity to switch over to another provider.”
Although consumers choose a lender, they do not choose a servicer. That judgment call comes from the originating lender. Mortgage servicers, not loan officers, are responsible for the management of home loans, including crediting monthly loan payments.
During the foreclosure crisis, many troubled homeowners became frustrated with mortgage servicers’ delays and sometimes lack of concern. If a mortgage loan was bundled and sold on the secondary market, servicers changed as well, despite homeowners never being given notice of a change in servicers or new operating terms.
As a result, millions of troubled homeowners were forced to seek the attention and assistance of servicers they did not hire, nor paid. Servicers, on the other hand, were more concerned with meeting expectations of investors and lenders rather than customers. Consequently, if servicers had been more responsive to consumers, the infamous ‘dual-tracking’ process would not have been so prevalent. Dual-tracking is the servicer practice of pursuing foreclosure at the same time that a troubled homeowner was seeking to modify or refinance their loan. The unfortunate consequence for affected homeowners was that they would learn of a foreclosure filing, not knowing that their servicer pursued dual interests.
CFPB’s Deputy Director Antonakes chose his audience well. The nation’s mortgage servicers manage a nearly $10 trillion portfolio for millions of American homeowners. The Mortgage Bankers Association (MBA) that invited Antonakes to speak represents the entire real estate finance industry in legislative and regulatory issues. Its influence is based on a nationwide network of 44 state associations and 2,200 member companies that together employ 280,000 people.
To the stakeholders assembled, Antonakes issued a warning that was as clear as it was direct:
“Servicing transfers where the new servicers are not honoring existing permanent or trial modifications will not be tolerated. There will be no more shell games where the first servicer says the transfer ended all of its responsibility to consumers and the second servicer says it got a data dump missing critical documents.”
Antonakes explained, “It’s not just about collecting payments. It’s about recognizing that you must treat Americans who are struggling to pay their mortgages fairly before exercising your right to foreclose. We have raised the bar in favor of American consumers and we are ready, willing and able to vigorously enforce that bar.”
Even with Dodd-Frank Reform enacted, many of the forces that opposed Wall Street Reform and Senate confirmation of a CFPB Director continue their assault on the Bureau. For example, the Consumer Financial Protection and Soundness Improvement Act of 2013 (HR 3193) would actually do the opposite of what its name implies: compromise the CFPB. The legislation would specifically:
• Replace CFPB’s single accountable director with a commission with members chosen by party leaders — a well-known recipe for gridlock;
• Remove the Bureau’s financial independence in favor of Congressional appropriations; and
• Weaken CFPB’s authority by authorizing an outside council to overturn consumer protection rules.
If these changes sound familiar, you’re right. All of them have been attempted before and all have failed. For some naysayers, active opposition to CFPB remains a goal. HR 3193 passed the House on Feb. 27 on a 232-182 vote and now advances to the Senate.
In the meantime, CFPB will continue to adhere to its statutory duties.
As Deputy Director Antonakes stated, “These profound changes will be good for all Americans, including industry. But please understand, business as usual has ended in mortgage servicing. Groundhog Day is over.”
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.firstname.lastname@example.org.