On August 21, the CFPB announced an administrative proceeding against a residential mortgage servicer (the respondent) for allegedly taking foreclosure actions against borrowers and preventing borrowers from leveraging foreclosure relief options. As previously covered by InfoBytes, the CFPB issued a 2017 consent order to resolve allegations that the respondent failed to provide mortgage borrowers with the required protections against foreclosures, among other things.

According to the 2024 consent order, the respondent failed to implement proper loss mitigation practices and therefore engaged in improper foreclosure activities. Specifically, the respondent allegedly took up to five days to review loss mitigation applications and decide whether the documents made the application complete before placing a foreclosure hold, then placed foreclosure holds retroactively which resulted in prohibited foreclosure activities. The CPFB stated such actions during that up-to five-day period violated Regulation X, 12 C.F.R. § 1024.41(f)(2) or (g).

Other allegations included (i) a violation of the 2017 order and RESPA’s Regulation X due to respondent advancing the foreclosure process improperly for certain borrowers, (ii) failing to terminate borrower-paid private mortgage insurance (PMI) in a timely manner and disbursing PMI premiums from escrow accounts incorrectly, failing to comply with the Homeowners Protection Act and Regulation X, and (iii) assessing late fees that were inconsistent with the terms of borrowers’ promissory notes, in violation of TILA’s Regulation Z. Additionally, respondent’s policies and procedures allegedly were not reasonably designed to ensure compliance with federal regulations and the 2017 order.

As part of the consent order, the respondent agreed to pay a civil money penalty of $2 million and providing $3 million in restitution to affected consumers. The respondent also agreed to invest at least $2 million to update its servicing technology and compliance management systems, establish a Compliance Committee of the Board, which must meet monthly, and engage an independent third-party auditor to conduct an annual comprehensive review and audit of respondent’s compliance with the consent order for the next five years. The order also put compensation limits on Edward Fay, the company’s Chairman of the Board and Chief Executive Officer CEO, if Mr. Fay does not take the necessary actions to comply with the order.