NEW CFPB RULES TO THWART WRONGFUL FORECLOSURES

August 28, 2016

The Consumer Financial Protection Bureau (CFPB) approved rules on August 5, 2016, to help prevent wrongful home foreclosures.

Mortgage servicers will be required to promptly notify borrowers when loss mitigation applications are complete.  Many mortgage servicers never considered an application complete and repeatedly demanded information and documents that the borrower had already provided.  Many borrowers complained that the servicers often demanded federal income tax returns over and over.  Borrowers were required to make adjusted monthly payments while the applications were pending.  The repeated stalling benefited the banks and servicers.  Many borrowers reported that when their applications were finally refused, the interim payments were never credited to their accounts.  Servicers are also prohibited from dual tracking – pursuing both a modification and a foreclosure simultaneously.

In a report released in June, 2016, the CFPB found that some servicers regularly give homeowners wrong or outdated information or no information at all.  The CFPB report issued on June 22, 2016 found that mortgage servicers try to hide behind bad computer systems or outdated technology as excused for violating CFPB rules that have been in effect since January 2014.

Although servicing rights are often frequently bought and sold among mortgage servicing companies, the computer systems used by these companies are very often incompatible. New servicers often failed to acknowledge that the previous servicer had agreed to a modification.  New servicers often did not receive the documents and information necessary to transfer the loan correctly.

Foreclosure defense attorneys report that employees of the current servicer often attempt to testify to the accuracy of the records and accounts of prior servicers though they have no actual knowledge of these record keeping systems.  These “robo-witnesses” often cannot authenticate the records provided by the banks at trial.  In particular, in cases where the original endorsed note was not filed with the complaint, the bank witnesses cannot testify when the proper endorsement was added.  The vast majority of endorsements are undated.