WASHINGTON Feb 11 The U.S. consumer financial
watchdog on Monday warned mortgage servicers that they must
extend legal protections to customers when transferring their
loans to another company, and said it will pursue enforcement
actions against those who do not comply.
The Consumer Financial Protection Bureau issued a bulletin
reminding servicers that they should not lose paperwork or
compromise troubled borrowers' chances of avoiding foreclosure.
The warning comes as many big banks are deciding that
collecting mortgage payments on some loans is too costly, and
are unloading these assets. New capital rules do not give as
much credit to mortgage servicing rights, and heightened
regulatory scrutiny have made the assets less desirable.
Bank of America Corp last month agreed to sell the
rights to collect payments on $300 billion in mortgages and is
looking to sell mortgage servicing rights on another $100
billion in loans, sources have told Reuters.
Ally Bank has also reportedly been looking to sell off a
large portfolio of mortgage collection rights. Smaller companies
that specialize in managing these collection rights are snapping
up the assets.
The CFPB said its concern about potential mortgage servicing
transfer abuses has increased due to the volume of recent
"Consumers should not be collateral damage in the mortgage
servicing transfer process," CFPB Director Richard Cordray said
in a statement.
Mortgage servicers collect monthly payments from borrowers
on behalf of the investors that own the loans. That often
involves letting borrowers know about the status of loans,
modifying the loans for those struggling to make payments on
time, and handling foreclosures.
In January, the CFPB announced news rules requiring
servicers to follow clear procedures to help troubled borrowers
seeking alternatives to losing their homes. The rules also
restrict what is known as dual-tracking, in which servicers
simultaneously pursue a loan modification and the foreclosure
The CFPB on Monday said that it is also make servicing
transfers a big focus of its supervision of both banks and
In particular, it will look at what steps servicers have
taken to ensure they provide customers accurate information,
whether the paperwork transfer is handled smoothly, and whether
loan modifications are honored by the new servicers.
The Federal Housing Finance Agency and the U.S. Department
of Housing and Urban Development issued statements on Monday
supporting the CFPB's scrutiny.