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CFPB Identifies Four Mortgage ‘Junk Fees’

The U.S. consumer watchdog’s report on junk fees focused on a range of businesses, such as banking and payday lending, and includes four used by mortgage servicers.

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) released a special edition of its Supervisory Highlights report on unlawful junk fees uncovered in deposit accounts and in multiple loan servicing markets, including in mortgage, student and payday lending.

“For years, junk fees have been creeping across the economy,” says CFPB Director Rohit Chopra. “Our report describes a host of illegal junk fee practices that the CFPB has uncovered across the financial services sector.”

A complete writeup of CFPB’s junk fee claims is posted on its website. Those leveled at the mortgage industry include “old and new ways that mortgage servicers attempt to run-up unlawful fees that are charged to homeowners”:

  • Excessive late fee amounts: Mortgage servicers charged the top late fee amount allowed by relevant state laws, even when homeowners’ mortgage contracts capped late fee amounts below state maximums.
  • Fees for unnecessary property inspections: Mortgage servicers charged consumers $10 to $50 fees for every property inspection visit to addresses that were known to be incorrect. Servicers continued to pay inspectors to go to the known incorrect addresses and continued to charge consumers for those visits.
  • Fake Private Mortgage Insurance (PMI) premium charges: Servicers included monthly PMI premiums that homeowners did not owe in their monthly statements.
  • Failure to waive fees for homeowners entering some loss mitigation options: CARES Act mortgage forbearance covered not only a mortgage’s principal and interest, but also stopped servicers from charging late fees during the period of forbearance. The Department of Housing and Urban Development (HUD) put further protections in place for homeowners that exited forbearance and went into permanent COVID-19 loss mitigation options, including waiving certain fees or other charges that accrued outside of forbearance periods. However, CFPB examiners found that some servicers failed to adhere to HUD’s additional protections, and charged homeowners late charges, fees and penalties that should have been waived.

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