Tags: Mortgage | servicing | bank | Ocwen

NYT: Mortgage Servicers Committing Same Abuses as Mortgage Bankers Did

By    |   Thursday, 20 February 2014 10:27 AM

Banks have sold an increasing amount of loan servicing rights to specialized firms, called mortgage servicers, creating a new front of problems for homeowners trying to avert foreclosure, The New York Times reports.

Mortgage service firms take over daily tasks associated with loans, such as collecting payments. But, they also play a major role in deciding whether homeowners get mortgage modifications or lose their homes to foreclosure, according to The Times.

As the mortgage industry has seen a "seismic shift" from banks to mortgage servicing firms, consumer complaints have been rolling in, the newspaper notes. In addition to poor customer service, many homeowners report a slew of frustrating complications, including mortgage modifications mired in delays and unfair foreclosures.

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Mortgage servicers are also accused of "shoddy paperwork, erroneous fees and wrongful evictions." These are the same abuses that dogged the nation's largest banks and led to a $26 billion settlement with federal authorities in 2012, The Times reports.

Rampant violations led Ocwen Financial, one of the nation's largest non-bank mortgage servicer, to reach a $2.1 billion settlement with the Consumer Financial Protection Bureau (CFPB) and 49 state attorneys general in December, according to CNNMoney.

CFPB spokesman Sam Gilford states that Ocwen's violations included "robo-signing documents during the foreclosure process."

But it didn't stop there. Ocwen took "advantage of borrowers at every stage of the process" and up to 185,000 consumers may have been unlawfully foreclosed upon by the company, Richard Cordray, director of the CFPB, tells CNNMoney.

Banks have been eager to shift handling of loans to mortgage servicers, as it eases banks' regulatory burdens and capital requirements. Mortgage servicing firms have been equally as eager to snap up bundles of servicing rights and now reportedly have 17 percent of the mortgage servicing market, up from 3 percent in 2010, The Times reports.

Initially, some federal regulators were optimistic about this shift, hoping the transition would mean troubled homeowners get more help than they had from the banks.

Now regulators realize mortgage servicers benefit from working through troubled loans as quick as they can. And regulators say the companies have not upgraded their technology or infrastructure to accommodate the growth of their businesses, The Times adds.

Regulators are also faced with questions about whether the companies are pushing homeowners into foreclosure or offering mortgage modifications that keep homeowners treading water, and ultimately cause them to fall even further behind, the newspaper explains.

Transferring the servicing rights from banks to private firms was supposed to be "seamless for consumers," Steve Antonakes, a deputy director CFPB, tells The Times.

"My experience is that things will go wrong in a transfer, it's almost guaranteed with this volume and speed," Lisa Sitkin, a managing attorney at Housing and Economics Rights Advocates in Oakland, Calif., tells CNNMoney.

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Banks have sold an increasing amount of loan servicing rights to specialized firms, called mortgage servicers, creating a new front of problems for homeowners trying to avert foreclosure, The New York Times reports.
Mortgage,servicing,bank,Ocwen
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2014-27-20
Thursday, 20 February 2014 10:27 AM
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