Family Loses Virginia Home as Regulators Target Nonbanks
By Kathleen M. Howley

Ranjan and Gita Chhibber said they failed in their year-long effort to save their Ashburn, Virginia, home because of forces beyond the couple’s control — a $1.3 billion mortgage deal between Bank of America and Nationstar Mortgage Holdings Inc. After the Chhibbers lost a small business and a chunk of their income in 2013, 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 nonbank servicer that has tripled in size in two years. That’s when the modification went off the rails, Gita said. “It’s a shame it has come to this,” said Chhibber, a 58-year-old mother of four, as she packed boxes the evening before moving out of her red-brick home. “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 nonbanks in the past two years. As nonbank servicers rapidly grow from the purchase of home loans, some firms are billing customers incorrectly, losing paperwork and failing to honor approved modifications, according to a Consumer Financial Protection Bureau statement in August. The bureau detailed new rules for mortgage transfers last month as part of its ongoing oversight of nonbanks. The CFPB in January enacted regulations that extended rules for banks, many stemming from legal settlements in 2012, to nonbank servicers. These firms collect mortgage payments and handle modifications and foreclosures. One of the rules bans servicers from requiring modification applicants to begin the process all over again after a loan transfer, said Sam Gilford, a CFPB spokesman. “Regulators never anticipated their servicing rules would be dodged by banks simply by selling off their mortgage servicing business to a shadow sector of nonbank companies,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics, a research firm in Washington. “The huge shift in the past two years shows clearly which way the business is heading.”