CFPB Issues Supervisory Highlights on Mortgage Servicing “Junk Fees”

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On April 24, 2024, the Consumer Financial Protection Bureau (CFPB) issued a Supervisory Highlights on what it perceives are junk fees being assessed by mortgage servicers. This continues an ongoing theme by the CFPB focusing on what it deems are junk fees with respect to deposit accounts, including overdrafts and mortgage lending. 

One of the CFPB’s main contentions is homeowners are not able to simply switch providers if their mortgage servicer charges them illegal junk fees, whereas a person can switch financial institutions if they do not agree with the fee policy of their current institution.

CFPB examiners found mortgage servicers committed unfair, deceptive, or abusive acts or practices (UDAAP). The nature of these violations by mortgage servicers included the following:

  • Charged property inspection fees on Fannie Mae loans where such inspections were prohibited by Fannie Mae guidelines.
  • Charged late fees exceeding the amount allowed in the loan agreement.
  • Charged late fees even though consumers had entered into loss mitigation agreements that should have prevented late fees.
  • Offered streamlined COVID-19 loan modifications but, in violation of RESPA, failed to waive existing fees after borrowers accepted the modifications.
  • Failed to provide a brief description of certain fees and charges in violation of RESPA when they used the general label “service fee” for 18 different fee types, without including any additional descriptive information. In response to these findings, the servicers implemented changes to provide more specific descriptions of each service fee.
  • Sent notices to consumers representing the consumers had been approved for a streamlined loss mitigation option even though the servicers had not yet determined whether the consumers were eligible for the option.
  • Sent notices informing certain consumers they had missed payments and should fill out loss mitigation applications. However, these consumers did not need to make a payment because they were current on their payments, in a trial modification plan or had an inactive loan (e.g., the loan was paid off or subject to short sale)

If you need help making sure your mortgage servicing fees and procedures are in compliance, our regulatory compliance specialists are here to assist. 

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John Zasada
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John Zasada is a Principal in Doeren Mayhew's Financial Institutions Group, where he assists financial institutions in navigating regulatory compliance.

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