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Foreclosure Issues Can Result in Heavy Penalties for Servicers

By May 18, 2020 June 10th, 2020
Foreclosure Issues can Land Servicers with Hefty Penalties

In a recent release, MBA quoted ‘With unemployment rising to a record 14.7 percent in April, it is inevitable that mortgage delinquencies would increase as well. 33.5 million U.S. workers applied for unemployment benefits in the past seven weeks, and with signs of economic distress continuing into the second quarter, mortgage delinquencies will likely further increase.’

The rise in delinquencies is also leading to a lot of borrowers seeking forbearance. The total number of loans now in forbearance increased to 7.91% as of May 3, 2020. According to MBA’s estimate, almost 4 million homeowners are now in forbearance plans.

Servicers Inundated with Forbearance Volumes

All of this means that servicers right now are being inundated with forbearance calls and to be fair, not many servicers have been prepared for this deluge. Servicers need to be considerate to these borrowers and engage with them meaningfully to ensure that most of these cases can be managed with loan modification remediation and that these do not move into foreclosure proceedings. While doing so, they need to take care of all the compliance issues as well, knowing very well that the CFPB is watching every move and borrower grievances can land them in trouble.

Compliance Penalties can be Hefty

In a recent release that appeared on HousingWire, CFPB has ordered a servicer to pay $1.5 million for foreclosure issues. The CFPB has charged them with taking prohibited foreclosure actions against mortgage borrowers who were entitled to protection from foreclosure.

According to the CFPB, the servicer violated both the Real Estate Settlement Procedures Act and the CFPB’s mortgage servicing rules by pursuing foreclosure on a number of borrowers despite the fact that they’d already requested other loss mitigation options, a process known as “dual tracking.”

The CFPB’s servicing rules, which took effect in 2014, prohibit servicers from starting the foreclosure process after a struggling borrower submits their loss mitigation application.

Beyond the monetary punishments, the settlement also requires the servicer to “implement policies and procedures that will ensure that borrowers receive the protections from foreclosure to which they are entitled under RESPA and Regulation X, including preventing the servicer from improperly making first filings, from improperly moving for foreclosure judgments or orders of sale, and from conducting foreclosure sales against borrowers who have submitted timely and facially complete or complete loss-mitigation applications.”

Visionet can help servicers with its unique solutions

With 25+ years of experience in mortgage, Visionet is well prepared to support servicers. We are 100% operational and continue to serve our clients from our 10 global offices. We can get you started in less than a week.

Visionet can help with its solution that addresses high call volumes and also provides alternate methods to manage borrower touchpoints from intake request to completion. Reach us on mortgage@visionet.com

Pitchiah Balasubramanian

Pitchiah Balasubramanian

Senior Vice President, Mortgage Solutions Senior versatile and innovative business technology leader with 28 years of progressive leadership experience in Financial Services (Banking, Capital Markets & Insurance), Textile Manufacturing, Sports, Entertainment, Transportation, and Consultancy. Providing leadership and oversight to Mortgage solutions for clients, product advisory and engaged in pre-sales activities