Steven Antonakes, the Consumer Financial Protection Bureau (CFPB) deputy director, was a bank regulator in Massachusetts when the foreclosure crisis began to unfold in 2006. At that time, he urged mortgage servicers to avoid foreclosures where possible and adopt best practices to protect consumers. Nearly eight years later, he remains “deeply disappointed” by the industry’s efforts. He told attendees at the recent Mortgage Bankers Association National Mortgage Servicing Conference & Expo that new servicing requirements that went into effect in January are designed to fundamentally alter the way servicers treat consumers, and he made it clear that the bureau will punish firms that violate the rules.
“My message to you today is a tough one. I don’t expect a standing ovation when I leave,” Antonakes said on Feb. 19. “In our view, the intense human suffering inflicted on American consumers by an all-too-frequently indifferent mortgage servicing system has required us to change the paradigm in mortgage servicing forever.”
Antonakes noted that new CFPB rules require servicers to send monthly statements showing how payments are applied. The rules require servicers to perform basic customer service functions such as returning phone calls and answering customer inquiries. Servicers must tell consumers about available options to avoid foreclosure. The rules also restrict “dual tracking” by barring servicers from starting foreclosure proceedings until the borrower has been delinquent for more than 120 days.
“Frankly, the notion that government intervention has been required to get the mortgage industry to perform basic functions correctly — like customer service and record keeping — is bizarre to me but, regrettably, necessary,” Antonakes said. “We mean to end a failed process in which too many struggling homeowners have been kept in the dark about where they stand. American consumers deserve better; they are entitled to be treated with respect, dignity and fairness.”
The bureau’s servicing rules are lengthy and complicated. They also took effect along with a host of other sweeping mortgage requirements. Bureau leaders have previously said that agency examiners will look to firms’ good faith efforts to comply with the new mortgage rules in the initial months following implementation. However, Antonakes hinted that servicers might not get much slack.
“A good faith effort … does not mean servicers have the freedom to harm consumers. It has felt like ‘Groundhog Day’ with mortgage servicing for far too long,” Antonakes said, referring to the early ’90s film in which a TV weatherman, played by Bill Murray, lives the same day over and over again.
Antonakes also set forth the bureau’s expectations for servicers.
In the early days following implementation, technical issues should “simply be identified and corrected.” He also said the CFPB will expect servicers to conduct outreach to ensure that all consumers in default know their options.
“We expect you to assess loss mitigation applications with care so that consumers who qualify under your own standards get the loss mitigation that saves them — and the investor — from foreclosure,” Antonakes said. “At the end of the day, foreclosures are an important part of the business, but they shouldn’t happen unless they’re necessary, and they must be done according to relevant law.”
Servicers will be expected to pay “exceptionally close attention” to servicing transfers to ensure that the new servicer has accurate information about the consumer’s account.
“Servicing transfers where the new servicers are not honoring existing permanent or trial loan modifications will not be tolerated,” Antonakes said. “Struggling borrowers being told to pay incorrect higher amounts because of the failure to honor an in-process loan modification — and then being punished with foreclosure for their inability to pay the incorrect amounts — will not be tolerated. There will be no more shell games where the first servicer says the transfer ended all of its responsibility to consumers and the second servicer says it got a data dump missing critical documents.”
Antonakes also said the CFPB expects servicers to turn to force-placed insurance “as a last resort, rather than using it as a profit center that feeds off consumers’ distress.”
“Business as usual has ended in mortgage servicing. ‘Groundhog Day’ is over,” Antonakes said. “Please understand: If you choose to operate in this space, the fundamental rules have changed forever. It’s not just about collecting payments. It’s about recognizing that you must treat Americans who are struggling to pay their mortgages fairly before exercising your right to foreclose. We have raised the bar in favor of American consumers, and we are ready, willing and able to vigorously enforce that bar.”