By: Lance T. Denha, Esq.
A consumer may spend months working on a loan modification or short sale with a lender, only to find out later that the loan has been transferred to a new servicer who chooses to either ignore the modification in place or deny the process entirely. This has been a growing concern over the past few years on which the Consumer Financial Protection Bureau has issued warnings to residential mortgage servicers and sub-servicers.
Federal Law Protections
According to the Consumer Financial Protection Bureau, servicers are reminded that the federal laws guide the compliance of a servicer and there are specific laws in place to prohibit unfair, deceptive, or abusive acts or practices by lenders and servicers. In accordance with these laws, the goal is to ensure that the lenders and servicers meet the legal obligations to protect consumers during loan transfers.
Servicers should also expect the Consumer Financial Protection Bureau examiners to test Servicers operations for compliance, including their processing and handling of loan modifications. The guidance warns Servicers that the Consumer Financial Protection Bureau “will take appropriate supervisory and enforcement actions” to address federal law violations and “seek all appropriate corrective measures including remediation of harm to consumers.
Servicers are also reminded that the Consumer Financial Protection Bureau servicing rules, which take effect on January 10, 2014, will require servicers to maintain policies and procedures designed to ensure that information and documents are transferred in a form and manner that ensures accuracy and enables servicer to comply with its servicing obligations. Such policies and procedures also must ensure that a transferee servicer can identify and obtain any missing information and documents during the process of the application for a loan modification. This is in response to the thousands of complaints that consumers have with respect to lenders losing paperwork, requesting to resubmit paper or claiming it was never received.
If a consumer feels that they are a victim of honest and good faith efforts in negotiating and settling loan modification or short sale, the Consumer Financial Protection Bureau will take a close look at the new servicers plans and procedures to ensure that they are providing accurate information to consumers and are identifying any ongoing loss mitigations options so the consumer does not have to restart the whole process over again. In addition, the Consumer Financial Protection Bureau will focus on such previous agreements previously reached prior to the transfer of the loan to the Servicer (i.e loan modification or short sales) in an effort to honor such agreements that were previously in place prior to any transfer. It is advisable to discuss your case with a legal professional to help properly direct you to the appropriate parties so that your case can be investigated to ensure compliance on the part of the new servicers.