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(From the ft.com) Many large US banks are scaling back their mortgage-collection operations, once-lucrative businesses that face heightened scrutiny as the new consumer finance regulator vows to step up its oversight of the industry. The Consumer Financial Protection Bureau, created last year as part of the Dodd-Frank overhaul of US financial regulation, will make the supervision of mortgage servicers, which collect payments and handle foreclosures, one of its top priorities, said Raj Date, a CFPB official.

The increased oversight is likely to lead to higher compliance costs, experts said, as the agency seeks to prevent abuses, such as lenders’ use of “robosigners”, agents who process foreclosure filings en masse without examining the underlying paperwork.

“The mortgage servicing market has been bogged down by widespread reports of pervasive and profound consumer protection problems,” Mr Date said. “We are going to take a close and measured look at whether servicers are following the law.”

Bank earnings reports last month showed that three of the four biggest home loan servicers by volume had reduced the number of contracts they handled, which also reflects the increasing cost of collecting payments from distressed borrowers and pursuing foreclosures.

Read more here: US banks scale back mortgage collection