CFPB and Mortgage Servicer Settle Alleged RESPA Violations for Less than $240,000

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The CFPB recently announced that it settled with a large mortgage servicer for the servicer’s alleged violations of the Consumer Financial Protection Act of 2010, RESPA, TILA, and their implementing regulations.  Under the terms of the consent order, the servicer must, among other provisions, pay a civil money penalty of $200,000 and pay restitution to affected customers estimated to be at least $36,500.

Most of the loans the company serviced are owned by Fannie Mae and Freddie Mac, and approximately 21% of the serviced loans were 60 days or more unpaid.  Further, the servicer offers loan modifications to eligible borrowers suffering economic hardships under proprietary programs offered by Fannie and Freddie and, until December 2016, the Department of Treasury’s Home Affordable Modification Program (HAMP). 

The CFPB alleges that the servicer violated the above-mentioned statutes by:

  • Handling mortgage servicing transfers with incomplete or inaccurate;
    • loss mitigation information, which resulted in failures to recognize transferred mortgage loans with pending loss mitigation applications, in-process loan modifications, and permanent loan modifications;
    • escrow information, which resulted in untimely escrow disbursements;
  • Inadequately overseeing service providers, which resulted in untimely escrow disbursements to pay borrowers’ property taxes and homeowners’ insurance premiums;
  • Failing to promptly enter interest rate adjustment loan data for adjustable rate mortgage (ARM) loans into its servicing system, which resulted in the issuance of monthly statements to consumers that sought to collect inaccurate principal and interest payments; and
  • Maintaining an inadequate document management system that prevented the servicer’s personnel or consumers from readily obtaining accurate information about mortgage loans.

In addition to its civil money penalty and restitution payments, the servicer must also: (i) update “its oversight and compliance management systems to promptly identify and correct potential servicing errors and violations of Federal consumer financial laws;” (ii) within 120 days of May 29, 2019—the date on which the Consent Order was issued—establish and maintain a comprehensive data integrity program to ensure the accuracy, integrity, and completeness of the data for loans that it services; (iii) “implement an information technology plan appropriate to the nature, size, complexity, and scope of the servicer’s operations;” and (iv) within 120 days after the implementation of the data integrity program and the information technology plan, obtain an assessment and report from a qualified, independent, third-party professional acceptable to the Enforcement Director which evaluates said program and plan according to specified factors.  Additionally, the servicer must not voluntarily transfer or acquire servicing for loans in loss mitigation or with a loss mitigation application pending, subject to a long list of exceptions.

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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