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Three mortgage employees at a table recent regulations by the CFPB

What Does the CFPB's Focus on Junk Fees Mean for You?

When it comes to federal regulators, few entities have kept mortgage servicers on their toes more than the Consumer Financial Protection Bureau. In recent years, the agency has paid increasing attention to the servicing industry, expanding its enforcement lens to include everything from loss mitigation processes to how servicers handle escrow accounts.

Most recently, the CFPB has turned its focus to “junk fees” that the agency says many servicers are illegally charging to consumers. And what the agency has uncovered is more than a little concerning.

Related: What the CFPB’s Servicing Metrics Mean for Your Business

What the CFPB Found

In April 2023, the CFPB launched an investigation into so-called junk fees in the mortgage servicing industry and their impact on consumers. Earlier this year, the agency released its findings, which revealed multiple instances in which servicers unfairly charged or overcharged homeowners.

An unhappy couple review their mortgage statement at home and find fees they don't understand.

Among the fees illegally charged to borrowers were property inspection fees that are prohibited by Fannie Mae and Freddie Mac guidelines and unauthorized late payment fees, including fees charged to borrowers who were in loss mitigation. The CFPB also found that some servicers failed to describe the fees being charged to borrowers on periodic statements and did not waive existing fees after a borrower accepted a streamlined COVID loan modification.

The CFPB described each of these practices as unfair and in violation of federal consumer financial protection laws. In some cases, for example, servicers simply used “service fee” to describe fees on a borrower’s statement instead of an actual description of what the fee was for, as required by Regulation Z. In some cases, servicers that were charging junk fees were required to stop and refund the funds they had already collected.

What This Means

The CFPB’s efforts to crack down on junk fees in mortgage servicing has significant implications for servicers. At the very least, servicers should be reviewing their fee structures to ensure compliance with regulatory guidelines and avoid penalties and reputational damage.

For many organizations, this could require implementing stronger oversight and controls and enhancing internal processes and systems to ensure accuracy and compliance when calculating fees. Servicers should also make sure that borrowers receive clearer explanations of fees on their periodic statements. On that note, the CPFB’s actions also underscore the importance of effective and transparent communication with borrowers, so they are able to make informed decisions about their mortgage.

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Of course, each of these endeavors can be extremely time consuming and costly. But perhaps the biggest factor behind keeping your servicing operations compliant and staying out of the crosshairs of federal regulators is your mortgage servicing technology.

Why Your Platform Matters

When it comes to navigating the CFPB’s ever-shifting focus—as well as meeting the requirements and guidelines of other regulators and investors—having the right technology at your disposal makes all the difference in the world. That’s where we come in.

For years, servicers have turned to MCC Mortgage Solutions because we offer more than just great software. We provide a comprehensive toolkit designed to streamline your operations and help you better manage compliance, regardless of the types of loans in your servicing portfolio.

RelatedAre You Paying Too Much for Outdated Technology?

With its focus on data accuracy, security, and customizable reporting capabilities, our Mortgage Servicing Cloud makes it simple for our clients to meet their compliance requirements with the CFPB and other state and federal agencies. And with the ability to interface with IVR technology and a borrower-facing portal, our platform also helps servicers provide prompt, transparent support to borrowers whenever they need it.

Unlike other one-size-fits-all servicing software, our platform can be easily tailored to meet your unique business needs as well as new regulatory requirements with very little coding. From robust data security measures to user-defined reports, tracking and screens, you have all the tools you need to keep your operations safe.

In a landscape where regulatory scrutiny is only increasing, choosing the right servicing platform is critical. To find out more about how MCC Mortgage Solutions can help you avoid unwanted attention from the CFPB, just give us a call at 248-350-9290 or email us at: info@mccmortgagesolutions.com.