• Unnecessary Property Inspection Charges – Mortgage investors generally require servicers to perform monthly inspection visits on properties for loans reaching a specific level of delinquency . To fulfill this requirement , servicers will hire a third party who will then send an agent to physically locate the property requiring inspection . Fees to perform inspections typically range from $ 10 to $ 50 . In some instances , examiners noted property inspectors would report to a servicer that an address was incorrect , and they would thereby be unable to complete the required inspection because of the error . However , instead of established appropriate procedures to ensure bad addresses were addressed and any fees to perform repeat inspections were internally absorbed , the servicer would continue to repeatedly hire property inspectors and send them to known bad addresses , and pass any associated fees along to the consumer .
• Misrepresenting PMI Premiums – Servicers sending monthly periodic statements and escrow disclosures including private mortgage insurance ( PMI ) premiums consumers did not owe . Premiums were associated with lender-paid PMI , which should not be billed directly to the consumer . Some consumers ultimately ended up overpaying their loan payments with these amounts after receiving incorrect statements .
• CARES Act Relief – The Coronavirus Aid , Relief , and Economic Security Act ( CARES Act ) of March 2020 directed servicers of federally-backed mortgages to grant concessions to consumers in the form of relief of monthly mortgage payments if the consumer experienced financial hardship as a result of the COVID-19 emergency . These reliefs generally applied to any additional interest , fees , and penalties incurred during the forbearance period , and were extended by the Department of Housing and Urban Development ( HUD ) when they further required servicers , in certain circumstances , to waive late charges , fees and penalties accrued outside of the forbearance periods . Some servicers were found to not have appropriately discontinued the practice of assessing fees to members in circumstances required by HUD , including situations where the consumer entered permanent loss mitigation programs .
• PMI Fees – The Homeowners Protection Act ( HPA ) requires servicers automatically discontinue PMI when the balance of a consumer ’ s mortgage loan is scheduled to reach 78 % of the original loan value based on the amortization schedule , provided the borrower is current on their obligations . However , the CFPB found some qualified borrowers did not have their PMI balance canceled once the loan reached the required value . This caused members to overpay PMI premiums that should have been canceled .
• Periodic Statement – Servicers were found to be sending out periodic statements in the last month of a member ’ s forbearance incorrectly listing a $ 0 late fee amount for the subsequent payment , when a late fee was actually charged if a payment was made late . For example , the CFPB noted , “ Consumers whose loans were in a forbearance period that ended on October 31st received a periodic statement during October billing for the November 1st payment ; the periodic statement listed a $ 0 late fee amount . But because the November 1st payment was due after the forbearance period ended , the servicers then charged these consumers their contractual late fee amount if they missed the November 1st payment , despite sending statements listing a $ 0 late fee .”
Payday Lending , Small-Dollar Lending and Student Loans
This next set of lending products and services with junk fees may not apply to your institution at the moment . However , should you decide in the future to either directly , or partner with a third party , to offer keep the below considerations in mind :
• Payment Splitting and Representment – In connection with payday , installment , title and line of credit loans , after unsuccessful debit attempts , examiners found servicers would split up missed payments into as many as four sub-payments and simultaneously represent them to consumers ’ bank for payment via debit card . These payments were not authorized and consumers were found to unknowingly incur multiple overdraft fees if payments did not clear . Unauthorized payments also impacted consumers finances if they were not anticipating the unauthorized drafts from their account .
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