By Sam Evans
Mortgage servicers will be forced to operate under more regulatory scrutiny if a proposed bill becomes law. That’s because the legislation would increase the Federal Housing Finance Agency’s oversight of mortgage servicers that conduct business with Fannie Mae and Freddie Mac—with the aim to protect borrowers from foreclosures.
Congresswoman Maxine Waters (D-CA), Ranking Member of the House Committee on Financial Services, introduced H.R. 6102, the Homeowner Mortgage Servicing Fairness Act of 2018, which “continues the fight to ensure hardworking Americans can remain in their homes,” according to a statement from her office.
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Rep Waters: Claims mortgage servicers are practicing ‘bad behavior.'[/caption]
“Borrowers can’t choose their servicer so it’s especially important that Congress provide strong protections to prevent servicers from taking advantage of borrowers and to protect borrowers from foreclosure,” said Waters. “This bill will implement common-sense reforms to ensure that servicers are giving borrowers every possible opportunity to avoid foreclosure.”
According to the legislation, in view of the heightened reliance by Fannie Mae and Freddie Mac on unilateral reviews of borrowers for loss mitigation in place of reviews of applications initiated by borrowers, there is an increased need for oversight to bring accountability to the loss- mitigation review process. In addition, borrowers have faced “wide-ranging problems with their mortgage servicers, including errors that have cost some borrowers money and have cost others their homes.” Fannie Mae and Freddie Mac own or guarantee nearly 60% of all mortgage loans.
Borrowers have also had to contend with lapses in basic mortgage servicing functions, such as inaccurate monthly statements, improperly credited payments, improper escrow handling, and improper servicing transfers. The failures led the Consumer Financial Protection Bureau to initiate enforcement actions against nine bank and non-bank mortgage servicers, from 2013 through 2017, for ‘‘mismanaging the loss-mitigation process, mistreating mortgage borrowers who were trying to save their homes from foreclosure and failing borrowers at every stage of the mortgage servicing process.”
The legislation is designed to deliver the following protections to borrowers, according to the statement:
- Enhances FHFA oversight of servicers who conduct business with Fannie Mae and Freddie Mac;
- Requires documentation of servicer behavior and FHFA evaluation of the services provided to borrowers;
- Penalizes servicer failure to meet minimum standards established by the FHFA.
“Mortgage servicers play a critical role in determining whether homeowners experiencing financial hardships will be forced out of their homes,” said Waters. “However, despite the lessons learned during the foreclosure crisis, we continue to uncover evidence of bad behavior by our nation’s mortgage servicers.
Sens. Catherine Cortez Masto, D-Nev., and Elizabeth Warren, D-Mass., sponsored companion measures in the upper chamber.The legislation is supported by the National Consumer Law Center and the National Fair Housing Alliance, but neither organization responded to requests for comments.