CFPB Takes Action to Enforce New Mortgage Servicing Rules

CFPB  •  Default Servicing  •  Dodd-Frank  •  Enforcement  •  Mortgage

The Consumer Financial Protection Bureau (CFPB) has entered a consent order with a mortgage bank following CFPB’s allegations that the bank violated the new mortgage servicing rules.  CFPB claimed that the bank:

  • took an unreasonably long time to process borrowers’ applications for loan modifications or other foreclosure relief;
  • failed to tell borrowers when their loan modification applications were incomplete;
  • denied loan modifications to qualified borrowers; and, 
  • illegally delayed finalizing permanent loan modifications.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions for violating the January 2014 mortgage servicing rules, and it also has authority to take action against institutions engaging in unfair, deceptive, or abusive practices. The CFPB order requires the bank to discontinue the practices set forth in the order, pay $27.5 million to borrowers, and pay a $10 million fine.  The CFPB’s order also contains some noteworthy additional requirements that mortgage servicers should be aware of, including that the bank:

  • cease acquiring default servicing rights from third parties until the bank “demonstrates” it can comply with the law during the loss mitigation process;
  • engage in efforts to help affected borrowers, including a door-knocking campaign and translations services to contact borrowers and offer them loss mitigation options; and,
  • for borrowers who were previously denied a loss mitigation option, the bank must do an independent review to determine whether the borrower was offered all loss mitigation options for which they qualified.

In remarks about the order, CFPB Director Richard Cordray stated that “The Bureau has been clear that mortgage servicers must follow our new servicing rules and treat homeowners fairly. Today’s action signals a new era of enforcement to protect consumers against the cost of servicer runarounds.”

 

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