US regulators target non-bank home loan servicers
Consumer financial watchdog issues guidance on how to handle the transfer of mortgages
Ranjan and Gita Chhibber said they failed in their year-long effort to save their home because of forces beyond their control - a US$1.3 billion mortgage deal between Bank of America Corp and Nationstar Mortgage Holdings.
After the Chhibbers lost a small business and a chunk of their income last year, they spent three months working with Bank of America to modify their loan. Before it was done, the bank sold their mortgage last year to Nationstar, a non-bank servicer. That was when the modification went off the rails, Gita said.
"It's a shame it has come to this," she said. "Every time I called Nationstar, they told me something different. They couldn't find my paperwork, they couldn't get answers to my questions, and they couldn't tell me what the fees were that they were adding to my mortgage."
The Chhibbers are among more than five million borrowers who have been bounced from banks to non-banks in the past two years.
As non-bank servicers rapidly grow from the purchase of home loans, some firms are billing customers incorrectly, losing paperwork and failing to honour approved modifications, according to a Consumer Financial Protection Bureau statement.
The bureau detailed new rules for mortgage transfers last month as part of its oversight of non-banks.