Welcome to the Mortgage Origination and Servicing chapter of our annual report Consumer Financial Services 2023 Year in Review.
Looking Ahead to 2024
Enforcement efforts are expected to increase in 2024 and will likely reflect anticipated industry growth (e.g., total mortgage origination volume is expected to increase to $1.95 trillion in 2024 from the $1.64 trillion expected in 2023).
The CFPB will likely focus its efforts on RESPA violations, force-placed insurance, and time-barred loans.
Key Trends From 2023
In 2023, Goodwin tracked 14 publicly announced enforcement actions related to mortgage origination and mortgage servicing. These 14 actions (ten federal and four state) produced recoveries of more than $87 million. Of these recoveries, $25 million was attributable to a federal action alleging improper mortgage loan payments by a payment processing company and $24 million was attributable to a federal action alleging False Claims Act violations. Although 14 actions is more than the seven tracked last year, it reflects a general decrease in the number of mortgage origination and servicing enforcement actions over the past nine years ' from several dozen per year in 2015, 2016, and 2017 to a mere 13 in each of 2019 and 2021. The amount recovered in 2023 was also substantially less than the $37.3 billion recovered the prior year and is the lowest annual recovery amount in the nine years that Goodwin has tracked such activity.
In the News
Statements from the CFPB in 2023 suggest three areas in which the Bureau may focus its efforts in the coming year: RESPA violations; force-placed insurance; and time-barred loans.
CFPB Advisory Opinion Notes RESPA Issues With Mortgage Comparison Websites
Regarding RESPA ' specifically, its prohibition on kickbacks for settlement-service referrals ' the CFPB issued an advisory opinion in February about possible RESPA issues associated with mortgage comparison websites. The opinion did not establish any new law or rules, but it did function as a warning to market participants that displaying or benefitting from "non-neutral" content on an online mortgage comparison platform might, in the Bureau's view, violate RESPA. Listing several examples of potentially violative conduct, the opinion cautioned against steering customers to one service provider over another based on anything other than neutral criteria, which might amount to unlawful referral activity. The Bureau's opinion, according to Director Chopra's accompanying statement, was "part of a broader all-of-government effort to end the illegal biasing of ostensibly neutral platforms."
CFPB Signals Anticipated Monitoring of Mortgage Servicer Compliance Regarding Force-Placed Insurance
Regarding force-placed insurance, Chopra gave public remarks in November, in which he anticipated that the increasing frequency and severity of natural disasters could precipitate problems with home insurance needs. Specifically, if existing coverage is revoked or canceled by insurers unwilling to cover certain hazards in certain areas, mortgage servicers may choose to force place property insurance and charge the homeowner for it. Recognizing the potential for abuse, noting the availability of insurance options, and emphasizing the notice requirements already in place for force-placing insurance, Chopra made clear that the CFPB would be "carefully monitoring" mortgage servicers for compliance with rules regulating force-placed insurance.
CFPB Issues Guidance Regarding Debt-Collection Efforts on Time-Barred Mortgages
Regarding time-barred loans, the CFPB clarified, in guidance issued in April, that bringing or threatening to bring an action to foreclose a time-barred mortgage may violate the FDCPA. The opinion was issued "in light of a series of actions by debt collectors attempting to foreclosure on silent second mortgages, also known as zombie mortgages" but pertains to any mortgage on which the statute of limitations has expired. It warns that any debt collector covered under the FDCPA may be in violation of that law if it tries to enforce a time-barred mortgage loan, even if the debt collector did not know the debt was time-barred.
New York's Foreclosure Abuse Prevention Act Leads to Court Split on Its Retroactive Applicability
Separate from regulatory activity, legislative acts in at least one state have affected the mortgage servicing industry. Signed into law on December 30, 2022, New York's Foreclosure Abuse Prevention Act (FAPA)...
