Top 5 Highest-Risk Mortgage Servicing Compliance Areas

Mortgage servicing is tricky with a plethora of potential compliance violations. Here are the five riskiest areas to watch closely.

1. Dual Tracking Violations

• Risk: ✳️ Foreclosure while loss mitigation is pending

• Why it’s high risk: Prohibited under Reg X § 1024.41(f)-(g) Leads to wrongful foreclosure, major CFPB fines, class actions Requires strong coordination across servicing, legal, and default ops

2. Loss Mitigation Handling & Timeliness

• Risk: ✳️ Mishandling or delaying borrower applications

• Why it’s high risk: Tied to borrower rights under Reg X 5-day acknowledgment, 30-day review, and appeal requirements Failures can cause borrower harm and expose servicer to liability

3. Foreclosure Referral Errors

• Risk: ✳️ Improper or premature foreclosure filings

• Why it’s high risk: Often violates state law and CFPB rules Borrowers in active mitigation or bankruptcy may be wrongly referred High-profile class actions and media attention

4. Force-Placed Insurance Violations

• Risk: ✳️ Charging for unnecessary or excessive insurance

• Why it’s high risk: Reg X § 1024.37 requires notice, timing, and cancellation safeguards Common CFPB enforcement area Can cause borrower defaults, investor repurchase risk

5. Inadequate Policies, Procedures, and Training

• Risk: ✳️ Systemic control weaknesses and staff errors

• Why it’s high risk: Violates Reg X § 1024.38 Weak oversight leads to multiple downstream violations Gaps discovered in exams lead to MRAs, enforcement, and restitution

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