Millions of homeowners around the country have received an unexpected message from their banks: Goodbye.
After years of collecting mortgage payments from as many people as they could, big U.S. banks such as Bank of America and Wells Fargo are scaling back. As servicing mortgages grows less lucrative, they’re selling the rights to do so in deals measured by the billions.
The buyers are specialty companies much less known to the public. And as the massive transfers take place, regulators have signaled they are concerned about a small but growing fraction of homeowners who report falling through the cracks.
Some have found their online accounts unavailable. Others have reported delays in receiving account numbers. The details of some promised loan modifications haven’t been carried through with the new servicer.
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In Charlotte, one man said his short sale, arranged with Bank of America, wasn’t honored after the mortgage was transferred. The home is now in foreclosure.
Tales like these have led the Consumer Financial Protection Bureau and Conference of State Bank Supervisors to warn the industry they’ll be paying close attention to how the handoffs work.
Mortgage servicers aren’t bracing for fines and penalties, industry watchers say, but they are investing more energy in making sure data technology is up to speed.
Both Bank of America and Wells Fargo said they’re working carefully with customers to make sure accounts are handled correctly.
The loans’ new owners, too, have beefed up teams to respond to consumer complaints. But they say they have a track record of handling the vast majority of loans successfully.
“We’ll have 2.5 million consumers that we service loans for,” said Executive Vice President Marshall Murphy of Texas-based Nationstar Mortgage Holdings, which earlier this year bought the rights to service $215 billion in loans from Bank of America. “Of course you’re going to have some instances where the consumer has not had a great experience. We’re trying to do all we can — one, to minimize that, and two, to address the problems that do arise.”
Servicing large mortgage portfolios has become less attractive for big banks for several reasons. Proposed capital rules count mortgage servicing rights as riskier than they were before, meaning banks have to keep a greater cash cushion against losses on those loans.
At the same time, the cost of servicing has increased significantly. Five big banks, including Bank of America and Wells Fargo, now have to abide by a slate of several hundred rules from a massive state and federal settlement.