The Consumer Financial Protection Bureau is taking aim at mortgage “junk fees” yet again, this time in the servicing sector.
The bureau released supervisory highlights addressing what it classifies as illegal junk fees, such as prohibited fees, deceptive notices sent to homeowners, and violations of loss mitigation rules.
“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.”
Servicers were found to have charged property inspection fees banned by Fannie Mae and late fees greater than allowed by their mortgage agreements. They also failed to make on-time tax and insurance payments, causing homeowners to incur penalties that they then did not address.
Some also failed to waive late fees and penalties established during the pandemic. Others were accused of sending deceptive notices claiming homeowners were approved for repayment options or had missed payments when neither was, in fact, true.
The CFPB said financial institutions have refunded these fees and stopped these practices in response to its investigation.
This is the second time in recent months that the Bureau has targeted mortgage-related fees. It is also looking closely at mortgage closing costs, including lender title insurance, appraisal charges, and discount points. Borrowers were encouraged to offer input on these fees and their financial impact.
Mortgage professionals have pushed back, however, saying closing costs cannot be considered junk fees.
“The fees mentioned are clearly disclosed to borrowers well before a home purchase on forms developed and prescribed by the Dodd-Frank Act and the CFPB itself,” Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a statement.
“The illogical use of the term ‘junk fee’ contradicts even the White House’s own definition, which cites the lack of disclosure of the fee being charged.”
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