Protect Yourself from Illegal Mortgage Fees

The Consumer Finance Protection Bureau (CFPB) recently released an update on its efforts to combat “junk fees” or illegal mortgage fees in the mortgage servicing market. These fees, often assessed improperly by banks and lenders, can lead to substantial financial harm for consumers.

Monitoring the market

“The CFPB is actively monitoring the market for emerging risks during a period of increasing default servicing activity since the end of the COVID-19 pandemic emergency. The mortgage industry has grappled with many challenges during this period, including increased requests for loss mitigation, changes to housing policies and programs, and staffing issues. While mortgage delinquencies and foreclosure rates remain near all-time lows, this
may change in the future as consumers grapple with higher levels of debt and affordability challenges due to high rates and low housing supply. Foreclosure starts have risen in recent months, increasing the risks that vulnerable consumers face”, wrote CFPB in the report.

This is what you need to know

Here’s what you need to know to safeguard yourself from illegal mortgage fees:

1. Be Aware of Exploitative Fees: The CFPB’s report highlighted instances where mortgage servicers charged illegal fees, such as improper late fees and unnecessary property inspection fees. Stay informed about the fees outlined in your loan agreement and question any that seem unjustified.
   
2. Understand Inspection Guidelines: Mortgage investors may require property inspections for delinquent accounts, but not all loans are eligible for such inspections. Familiarize yourself with guidelines from entities like Fannie Mae to know when inspections are allowed and challenge fees that violate these guidelines.
   
3. Watch for Deceptive Practices: The CFPB’s examinations uncovered deceptive loss mitigation notices, delays in escrow disbursements, and failures to waive fees after loan modifications. Be vigilant for any misleading communications or unauthorized charges on your mortgage statements.
   
4. Know Your Rights: As a homeowner, you have rights under regulations like RESPA (Real Estate Settlement Procedures Act). If you suspect illegal fees or deceptive practices, report them to the CFPB and seek guidance from consumer protection agencies or legal professionals.