Maryland regulators have failed to ensure taxpayers are refunded hundreds of thousands in illegal fees charged by crooked mortgage lenders, according to a state-sponsored audit.
The Maryland Office of the Commissioner of Financial Regulation identified more than $1.5 million in illegally charged fees during fiscal 2009, but in many cases, the agency never followed through to ensure borrowers were refunded, according to an audit by the state’s independent Office of Legislative Audits.
The agency blamed much of its lack of oversight on the recession.
“The [past] two and a half years … have brought unprecedented challenges as the agency has confronted the twin financial and foreclosure crises,” financial regulation commissioner Sarah Bloom Raskin wrote in a response to the audit. “Complaints and investigations have risen to record levels, along with recoveries for consumers, while licensing requirements have been significantly elevated.”
In a test of eight lenders that owed $62,000 in illegally charged fees, five have never paid borrowers proper refunds — which amounted to $32,144, the audit found.
The Office of the Commissioner of Financial Regulation also was found lagging in its routine examinations of state lenders. The agency is required to review lenders once every three years to ensure they are properly licensed and complying with state regulations.
But auditors found the agency failed to review roughly one out of every five Maryland lenders in the required time frame. More than 100 of the 363 overdue reviews were late by one to five years.
Raskin, who has been nominated to the Federal Reserve Board and is awaiting Senate confirmation, said she expects to be caught up with reviews by December.
The audit is the third released this month reporting a lack of oversight in Maryland state agencies. The state auditing agency reported on Tuesday that the Maryland Higher Education Commission has lost $3.2 million in scholarship funding. Earlier this month, the agency found Maryland’s tax department had failed to regulate hundreds of companies illegally doing business in the state.
