Avoid These Mortgage Servicing Practices

Credit unions that service mortgage loans should have policies and procedures in place to ensure employees are adequately trained.

August 1, 2012

In June, the five federal financial institution regulators issued guidance to mortgage servicers on certain practices that have the “potential to mislead or otherwise cause harm” to military homeowners who receive Permanent Change of Station (PCS) orders. These practices include:

Failing to provide homeowners who notify the servicers of their PCS orders with accurate, clear, and readily understandable information about available assistance options the homeowner may qualify for, based on the information known to the mortgage service. For example, the Making Home Affordable Program and programs offered by or through Fannie Mae, Freddie Mac, the Federal Housing Administration, the Department of Veterans Affairs, etc.

 Asking homeowners with PCS orders to waive their legal rights under the Servicemembers Civil Relief Act or any other law as a prerequisite to either providing information to the homeowner about available options or evaluating the homeowner’s eligibility for assistance.

Advising homeowners with PCS orders who are current on their loans and able to make the monthly payment to intentionally skip making payments to create the appearance they’re having financial difficulties to obtain assistance they wouldn’t otherwise qualify for.

Failing to provide a reasonable means for homeowners with PCS orders to obtain information on the status of their request for assistance.

Failing to communicate on time the servicer’s decision regarding requests for assistance from homeowners with PCS orders and failing to include an explanation of the reason for the denial, where required, so the homeowner has an opportunity to address any deficiencies, if applicable.

Credit unions that service mortgage loans should have policies and procedures in place to ensure employees are adequately trained about the options available for assisting military homeowners with PCS orders. They also should ensure the information provided to military homeowners is accurate, clear, and readily understandable.

If an institution’s regulator determines a mortgage servicer has engaged in practices that are unfair, deceptive, or abusive, or if a regulator determines that a mortgage servicer has in any way violated federal consumer financial laws, it will take appropriate enforcement action.