Delinquency fees charged to forbearance-holders, payment handling violations, and pricing discrimination are among the mortgage-related violations highlighted by the Consumer Finance Protection Bureau’s (CFPB) latest Supervisory Highlights report.
“Today’s report reveals that irresponsible or mismanaged firms harmed Americans during the COVID-19 pandemic,” said CFPB Director Rohit Chopra. “We will continue to supervise firms to halt harmful practices before they become widespread.”
The report, which did not name particular companies, outlined illegal actions the CFPB claims to have observed in the first half of 2021. The CFPB supervises banks with assets of more than $10 billion and some non-banks, including mortgage companies, private student lenders, and payday lenders.
The report called out mortgage lenders for the following:
- charging delinquency-related fees to borrowers in forbearance
- failing to stop preauthorized electronic funds transfers
- charging “unauthorized amounts”
- failing to evaluate complete loss mitigation applications within 30 days
- incorrectly handling partial payments
- failing to terminate private mortgage insurance
The CFPB also reported lenders having “statistically significant disparities for the incidence of pricing exceptions for African American and female applications compared to similarly situated non-Hispanic white and male borrowers,” and “[failing] to retain documentation to support pricing exceptions.”
Lenders also “improperly [inquired] about small business applicants’ religion” and “[considered] an applicant’s religion in the credit decision.”
Most violations did not lead to enforcement action, though the report included an ominous reminder that the CFPB has already warned companies that pandemic-related leniency has ended and that it won’t tolerate fair lending violations.
Last month, the CFPB released a joint statement with other government agencies to mortgage servicers announcing the end of an April 2020 decision not to take “supervisory or enforcement action” regarding the timing requirements of the Regulation X mortgage servicing rules during the pandemic.
“Failures by mortgage servicers and regulators worsened the impact of the economic crisis a decade ago,” Chopra said in the announcement. “Regulators have learned their lesson, and we will be scrutinizing servicers to ensure they are doing all they can to help homeowners and follow the law.”
The report also referenced the recent case against Trustmark National Bank, which settled last month after the CFPB and Justice Department accused it of discriminating against Black and Hispanic borrowers in Memphis, TN.
Though the report referenced bad behavior in all areas supervised by the CFPB, mortgage-related infractions were addressed particularly, accounting for two of the four sections in the bureau’s press release.
Chopra has zeroed in on housing, especially foreclosures, since he was appointed CFPB Director. In testimony to the House Financial Services Committee, he said he wants to encourage more competition in the mortgage refinance market for families with lower balance mortgages and implement policies to reduce avoidable foreclosures.