Don't count on your mortgage servicer to be honest with you
about the status of your loan modification application. That's one
of the findings from an industry review by the federal Consumer
Financial Protection Bureau.
The bureau released a report last week that described serious
issues with the way mortgage servicers transfer accounts, process
payments and work with homeowners. In addition, it discovered that
some nonbank mortgage servicers may lack independent auditing or
otherwise be out of compliance with federal law.
"Today's report highlights both the mortgage servicing problems
throughout the industry and the challenges of making sure that
nonbanks are following federal law" said CFPB Director Richard
Cordray in a written statement. "Fixing both is a priority for
Poor communication, sloppy paperwork among
Mortgage servicers are companies that process loan payments on
behalf of lenders, and they may handle various other duties related
to these loans, including foreclosure proceedings. The CFPB report
identified three areas where mortgage servicers may fail to
properly protect the consumers they serve.
- Account transfers
- Payment processing
- Loss mitigation
Specifically, the bureau discovered some mortgage servicers fail
to properly inform customers when their
are transferred to a new servicer. The CFPB notes that when
transfers take place, servicers may have disorganized paperwork and
no protocols in place to protect key documents.
Similarly, consumers may not be notified of new payment
addresses in a timely manner, resulting in late payments. Some
servicers also fail to make property tax payments from escrow
accounts as expected or delay cancellation of private mortgage
Loss mitigation appears to be an area of significant concern,
with the CFPB unearthing evidence of poor procedures, lengthy
application review times and inconsistent underwriting standards
for loan modifications. Even more distressing for consumers may be
the deceptive communications reportedly found at some servicers.
According to the CFPB, failure to be transparent and clear in
communications may have accelerated foreclosures in some cases.
The best and worst mortgage servicers
Customers don't always have a choice on who services their
mortgage, but research suggests that there are major differences in
how customers perceive various servicers.
A 2013 survey by J.D. Power and Associates found Branch Banking
& Trust had the highest customer satisfaction among primary
mortgage servicers. It was the fourth straight year the servicer
had topped this list. Regions Mortgage placed second for customer
satisfaction in the survey, and SunTrust Mortgage placed third.
Meanwhile, Nationstar Mortgage landed in the bottom spot for
customer service satisfaction, just ahead of Ocwen Loan Servicing
and EverHome Mortgage.
Because of the frequent sales between mortgage servicers, having
the best servicer at loan origination is no guarantee that the loan
will not be transferred to another servicer in the future. Because
the CFPB says companies do not always promptly notify customers of
loan transfers, consumers may find it wise to carefully review
their loan statements each month.
In addition, to avoid late fees or penalties, customers may want
to double-check their statement for changes to their payment
mailing address and to confirm with their municipality that their
property taxes have been paid on time.