Watch CBSN Live

Mortgage servicer abuses still plague homeowners

Despite the billions of dollars in fines levied against mortgage lenders and servicers, the mortgage industry continues to mislead and mistreat homeowners, according to the federal government.

A report released by the Consumer Financial Protection Bureau earlier this month found that just under half of the 187,818 complaints filed with the agency concerned mortgage problems, with the overwhelming majority of these involving servicing, loan modifications and foreclosure activities by mortgage servicers.

"I remain deeply disappointed by the lack of progress the mortgage servicing industry has made," Steve Antonakes, the CFPB's deputy director, told a conference of mortgage service providers this week. "Frankly, the notion that government intervention has been required to get the mortgage industry to perform basic functions correctly -- like customer service and record keeping -- is bizarre to me but, regrettably, necessary."

The CFPB is getting complaints about careless paperwork, incorrect fees and illegal evictions. These are the issues that forced the banks to come to a $26 billion settlement with the government two years ago. Now there's a new source of these abuses: mortgage servicers, the companies whose main business is collecting mortgage payments.

Banks have been eager to not have to deal with servicing issues, and as a result Nationstar (NSM), Ocwen Financial (OCN), Walter Investment Management (WAC) and other servicing companies have been buying up servicing rights as fast as they can. Their share has skyrocketed from 3 percent of the mortgage servicing market in 2010 to 17 percent by last year, according to Inside Mortgage Finance, an industry publication.

This rapid growth is one cause of the increase in complaints. Observers say servicing businesses haven't expanded their technology enough to handle all the new mortgages they're taking on. Another cause of problems may stem from these companies being nonbank entities that haven't had much government oversight.

That's changing. The CFPB issued new rules for what the servicing companies must do that went into effect in January. Earlier this month, New York State's Department of Financial Services put an indefinite hold on the transfer of about $39 billion in servicing rights from Wells Fargo (WFC) to Ocwen. The department cited an ongoing investigation into alleged misconduct in mortgages the firm is already handling as one reason for the delay.

In December, Ocwen agreed to a $2.1 billion settlement with the federal government and 49 states over claims of charging unauthorized fees, failing to credit borrowers' mortgage payments in a timely fashion, improperly imposing expensive insurance policies and filing foreclosure documents in courts without verifying the information in them.

"To clean up the mortgage servicing market, we also are taking aim at practices that have given too many consumers the runaround," said Antonakes. "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."

View CBS News In
CBS News App Open
Chrome Safari Continue