This stern reminder serves as a warning to banks that they will be liable for the illegal actions of debt collectors, especially mortgage servicers, many of which have been abusing homeowners for several years.
Federal Reserve Cracks Down on Abusive Mortgage Practices
According to reports, the Federal Reserve Board placed a particular emphasis on banks' duty to exercise heightened supervision over the activities of ARM firms, debt collectors, and mortgage servicers. These entities were responsible for much of the debt-related chaos that ensued after the recent recession.
The federal agency's warning statement also noted that banks should monitor the actions of their vendors as if those third parties were extensions of the financial institutions themselves, rather than wholly separate contractors that can play by their own rules.
To avoid confusion, in the latest memo, the Federal Reserve defined "third party vendors" as any entity that signs a contract with a bank to perform a number of different business activities, including reviewing loans, collecting debts, and bring foreclosure actions against homeowners.
Federal Officials Extend Protections for Struggling Homeowners
In addition to the Federal Reserve's recent reminder, the Consumer Financial Protection Bureau has also warned banks that they must monitor third parties more carefully. And, just a few months ago, the CFPB issued a statement reminding banks that their vendors must adhere to the rules of the Federal Debt Collection Practices Act.
And this focus on third parties, particularly mortgage servicers, will provide a huge boost for homeowners in Illinois, where tens of thousands of residents will face foreclosure filings this year. Unfortunately, these foreclosure actions are often brought by servicers with little regard for consumer protection laws.
Today, however, consumers have more ammunition against fraudulent mortgage activities. But it requires a bit of legal legwork. To protect your rights as a homeowner against unscrupulous lenders, contact a foreclosure defense attorney today.