On December 19, the CFPB and attorneys general for 49 states and the District of Columbia, and a nonbank mortgage servicer, filed a proposed consent order in the U.S. District Court for the District of Columbia, pursuant to which the servicer will be required to provide $2 billion in principal reduction to certain borrowers and refund $125 million to nearly 185,000 borrowers who were foreclosed upon.

The agreement is modeled on the 2012 national mortgage servicing settlement between five banks and federal and state authorities, and it is the first such agreement with a nonbank mortgage servicer. The proposed order would resolve allegations that the servicer, and two other servicers it acquired in recent years, engaged in unfair and deceptive acts and practices in the servicing of residential mortgages and foreclosure processing in violation of state consumer protection laws and the Consumer Financial Protection Act. Those allegations are detailed in a complaint filed by the CFPB and states on the same day.

Along with the monetary settlement, the agreement requires the servicer to implement numerous servicing policy changes, which incorporate the standards established in the national servicing settlement and add requirements related to transferred loans. The servicing requirements included in the settlement are in addition to new servicing standards the CFPB finalized earlier this year, which take effect on January 10, 2014. Compliance with the agreement will be overseen by the monitor of the national settlement. The agreement does not include releases for any potential claims of criminal liability and does not prohibit private actions.

Topics:  Banking Sector, Foreclosure, Lenders, Mortgage Servicers, Mortgages, National Mortgage Servicing Settlement, National Mortgage Settlement, Real Estate Market, Unfair or Deceptive Trade Practices, Wrongful Foreclosures

Published In: Consumer Protection Updates, Finance & Banking Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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