Mortgage Professional America reports that regulators are focusing their attention on mortgage servicers. Concerns range from liquidity issues to improper loan modification procedures to complaints about unauthorized and excessive fees.
MPA reports that the Federal Housing Finance Agency plans to roll out new risk management guidelines after Thanksgiving. They fear that some servicers are showing signs of “weakness.”
The FHFA’s announcement comes on the heels of several complaints by the New York Department of Financial Institutions about Ocwen Financial Corp. The latest round of complaints concern loan modifications. Last month Lawsky claimed that Ocwen had backdated letters to homeowners concerning their right to seek a loan modification. In some case, the letters were sent too late to help homeowners.
State banking superintendent Ben Lawsky has clashed with Ocwen before.
Ocwen isn’t the only mortgage servicer in trouble. Earlier this year regulators took aim at Nationstar Mortgage Holdings. Although many banks perform servicing duties, nonbank companies like Ocwen and Nationstar administer billions of dollars worth of mortgage portfolios.
One of the biggest consumer complaints about mortgage servicers is how they handle loan modification. Congress intended substantial relief for people underwater on their loan but wanting to remain in their home. Under the HAMP program, banks have the ability to stretch our payments, reduce interest rates and in some cases, write down principal. Unfortunately, banks and servicers have made a mockery of the modification process.
One reader wrote to Mortgage Professional America and said,
“I would like to know where, either Wells Fargo or American Servicing applied the $89,000 of trial payments I made over 4 years…in 6 different Modification plans. I finally gave up trying to work with them. Refused to be sucked into yet another trial period. Sending them another ream of the same paperwork over and over again (It seems papers were frequently misplaced & needed to be sent again). After my 6th attempt, I received another round of letters with “stamped” signatures, I gave up and moved out with what I could carry. Bank foreclosed a year later and my home of 19 years went to Auction.”
Tales like this are tragic but we hear them daily. By being behind on their mortgage, it is only fair to assume that most people facing foreclosure are in financial crisis. They don’t have money for lawyers.
We believe that mortgage servicers know this too. It is the reason that so few people can successfully fight back. They simply can’t afford a lawyer.
Thankfully regulators are beginning to take notice. Ditto for company insiders who become whistleblowers. Because most residential mortgages are backed by the government, any fraud by a mortgage servicer is a potential False Claims Act violation. That law allows the government to seek triple damages. The law also allows whistleblowers to receive compensation for their information.
We are currently recruiting whistleblowers with inside information about HAMP fraud, illegal foreclosures or shoddy mortgage servicing. Already some whistleblowers have been paid tens of millions of dollars in rewards.