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CFPB doubles down on mortgage servicing enforcement

Promises bold and swift action to send a message

The new acting director of the Consumer Financial Protection Bureau (CFPB), Dave Uejio, told staff in an email on Thursday that the bureau will direct its attention to mortgage servicers, promising “aggressive action” to ensure companies follow the law.

In the email, Uejio laid out his vision for the coming months, saying that his top two prioities are relief for consumers facing hardship due to COVID-19 and the related economic crisis and racial equity.

“One thing we can do immediately is focus our supervision and enforcement tools on overseeing the companies responsible for COVID relief,” Uejio said in the email. “I am concerned about the findings described in last week’s Supervisory Highlights edition that companies are failing to properly administer relief through the crisis.” Here are some of the issues the acting director highlighted on servicers:

  • Mortgage servicers gave consumers incomplete and inaccurate information about CARES Act forbearances, failed to process forbearance requests and collected and assessed late fees despite having approved forbearances.
  • Servicers withdrew money even though consumers were in deferment.
  • One student loan servicer denied thousands of forbearance extensions because the loan holder never responded.
  • Companies across markets misreported accounts to credit bureaus and violated CARES Act amendments that added protections to the Fair Credit Reporting Act.
  • Some banks set off stimulus payments and unemployment insurance benefits in order to cover bank fees and other debts.
  • Examiners found that the widely used policy of banks only taking PPP applications from pre-existing customers may have a disproportionate negative impact on minority-owned businesses.

Uejio also gave instructions to CFPB colleagues to expedite enforcement investigations relating to COVID-19 in order to send a message to the industry at large.

Uejio said all of this will be done alongside reversing changes made by the Trump administration that he says “weakened enforcement and supervision.”

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“As of today, it is the official policy of the CFPB to supervise lenders with regard to the Military Lending Act,” he wrote. “And we are planning to rescind public statements conveying a relaxed approach to enforcement of the laws in our care.”

Uejio also promised to take “bold and swift action” to ensure racial equity, saying the country is having a long-overdue conversation on the subject.

“I am going to elevate and expand existing investigations and exams and add new ones to ensure we have a healthy docket intended to address racial equity,” he said in the email.

“This of course means that fair lending enforcement is a top priority and will be emphasized accordingly. But we will also look more broadly, beyond fair lending, to identify and root out unlawful conduct that disproportionately impacts communities of color and other vulnerable populations.”

This serves as a stark contrast to the treatment servicers received under the Trump administration. In October 2020 at the Mortgage Bankers Association Annual convention, Federal Housing Finance Agency Director Mark Calabria took the opportunity to recognize the effort servicers were making to help borrowers in forbearance and even thanked them. The message was clear: the mortgage industry wasn’t in the hot seat for this recession.

Until now.

This could be the first step of many as the bureau looks to increase its regulatory efforts. Under President Biden, the CFPB is poised to turn back the clock and former CFPB Director Richard Cordray believes the next four years could look a lot like his time in office.

Uejio will serve as acting director until Biden’s nomineeFederal Trade Commission Commissioner Rohit Chopra, is confirmed by the Senate as the next director of the CFPB. Once taking over, there is a high expectation that Chopra will ramp up the bureau’s regulatory efforts, but Uejio isn’t wasting any time.

“On COVID-19, we need to take swift action now, in order to make sure our actions help people in the middle of the crisis, rather than just cleaning up after the fact,” he said. “As you know, protecting economically vulnerable consumers is core to the mission of the CFPB and a key reason why the agency was created. It is going to take urgent action for the CFPB to step up to this challenge.”

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