Mortgage Transfers Pose Risk for Borrowers Hit Hard by Pandemic

A potential wave of coronavirus-related loan sales by cash-strapped mortgage servicers could result in botched borrower paperwork and unnecessary foreclosures, consumer advocates and policymakers say.

With millions of U.S. mortgage borrowers obtaining forbearance or simply skipping payments themselves, concerns about liquidity at small servicing companies in particular have raised alarms at the Consumer Financial Protection Bureau, and among consumer advocates and industry attorneys about a potential wave of asset sales and servicing transfers.

Such transactions can be bumpy for borrowers in normal economic times. It isn’t uncommon for loan files to get misplaced or have errors in mortgage servicing transfers, ...