Dozens of consumer advocacy groups are complaining the nation’s consumer watchdog doesn’t have the teeth to take a bite out of abusive mortgage servicer behavior other regulators consider criminal.
Given the history of abusive, predatory, and discriminatory behavior, mortgage servicers need strict oversight and scrutiny that’s just as unrelenting as their apparent reluctance to stop victimizing consumers.
The California Reinvestment Coalition (CRC), the Law Foundation of Silicon Valley (LFSV), the Housing & Economic Rights Advocates (HERA) and nearly 60 community groups say the Consumer Financial Protection Bureau’s (CFPB) planned new mortgage servicing rules don’t go far enough.
Authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act, CFPB’s rules seek to protect consumers from toxic mortgages on the origination side, poor mortgage servicing during the term of the mortgage and the kind of foreclosure abuse servicers institionalized after the housing crash.
In a letter to CFPB, the consumer groups applaud the consumer protection agency’s proposed rules for potentially improving some aspects of mortgage servicing, especially in the area of disclosures and more transparency.
The groups say the proposed standards will help consumers in the mortgage servicing areas of billing cycles, rate adjustment notices, payments, and other areas.
However the groups are unhappy with the scope of the proposed rules including issues that have been the subject of consumer complaints, civil, state and federal suits among other actions.
“For years leading up to the subprime and foreclosure crises, too many regulators were toothless and subservient to the banks they were supposed to be regulating,” said James Zahradka, supervising attorney at LSFV and board chair at CRC.
“Now that we finally have an agency which is not beholden to the banks, we need CFPB to stand tall and put in place meaningful, strong standards,” Zahradka added.
According to the consumer advocate groups’ letter to CFPB:
• The proposed regulations do not create a minimum standard of ethical, required treatment of homeowners facing difficulties paying their mortgage.
• The standards don’t address “dual tracking,” a deceptive mortgage servicer practice of simultaneously foreclosing on a property while the homeowner is undergoing a mortgage modification.
California’s Homeowner Bill of Rights outlaws the practice and forces mortgage servicers to give homeowners an opportunity to pursue a modification or other workout before the bank begins foreclosure.
The California Monitor, a program of the state’s attorney general to oversee implementation of the California Homeowner Bill of Rights and the National Mortgage Settlement in the Golden State says dual tracking declined, but continued during initial implementation of the national settlement.
Zeroing in on dual tracking, the monitor’s first report, “Waiting for Change: Dual Tracking and Home Foreclosure” says 25 percent of all complaints it received mentioned a dual tracking problem.
• CFPB’s proposal ignores the plight of renters, including the failure to return security deposits, utilities that were prematurely shut off, and unexpected evictions. More than 38 percent of households affected by the foreclosure crisis were renters. Both the federal “Protecting Tenants in Foreclosure Act” and other state (including California’s Homeowner Bill of Rights) and local ordinances protect renters who live in properties facing foreclosure.
• CFPB does not address maintaining repossessed properties, resulting in habitability and vacancy issues that contribute to blight, criminal activity, and decreased property values that keep communities mired in crisis.
The problem is particularly acute in minority neighborhoods, an issue addressed in the National Fair Housing Alliance’s (NFHA) “The Banks Are Back – Our Neighborhoods Are Not” and in subsequent federal complaints.
Consumer advocacy groups are hard on target with their complaints against CFPB over mortgage servicing rules. Reams of documentation, civil, state and federal complaints and suits, national settlements, and other actions prove mortgage servicers are incapable of self-regulation when it comes to mortgage consumers’ best interests.
“The CFPB should take this important opportunity to push their proposal further to truly protect all communities,” said Maeve Elise Brown of HERA and a member of CFPB’s Consumer Advisory Board.
The CFPB has until January to finalize its mortgage servicing rules.