The Consumer Financial Protection Bureau (CFPB) issued a warning last week reminding mortgage lenders that they should not compromise loans through servicing transfers.
According to Reuters, the warning came as “many big banks are deciding that collecting mortgage payments on some loans is too costly, and are [transferring] these assets.”
“Consumers should not be collateral damage in the mortgage servicing transfer process,” said CFPB Director Richard Cordray said in a press release. “This guidance directs all mortgage servicers, both banks and nonbanks, to follow the laws protecting borrowers from the risks of such transfers, and makes clear that we will be monitoring them for compliance.”
Mortgage servicing transfers can be challenging, as they can involve moving of hundreds of thousands of documents, which can lead to processing errors. They can also be troubling for borrowers, who have to deal with different providers, paperwork and billing addresses.
While we appreciate the CFPB efforts in trying to prevent errors during loan transfers, we predict that these large-scale mortgage transfers will lead to servicing errors and property foreclosures.
Homeowners should know that they could save their property through Chapter 13 bankruptcy, which generates an automatic stay that will stop foreclosure.
A Chapter 13 bankruptcy also affords homeowners the opportunity catch up on past due property taxes and mortgage payments, as you enter into a repayment plan that can last anywhere from three to five years