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WBK Industry News - Federal Regulatory Developments

CFPB Issues Consent Order Against Mortgage Servicer for Ineffective Loss Mitigation Policies and Procedures

The CFPB issued a Consent Order on June 7, 2017, against a mortgage servicer (“servicer”) for alleged violations of the Mortgage Servicing Rules (“MSR”).  Specifically, the CFPB alleged that the mortgage servicer: (1) took prohibited foreclosure actions against borrowers; (2) failed to send out timely acknowledgement and evaluation notices required by the MSR; and (3) if the acknowledgement and evaluation notices were sent out, the notices were inaccurate or incomplete.  The Consent Order requires the servicer to pay $1.15 million dollars in redress as well as record, maintain, and track a wide variety of data fields.

The Consent Order alleges that after January 10, 2014, the effective date of the MSR, the servicer failed to adequately respond to consumers seeking loss mitigation options by failing to timely provide the required acknowledgement and evaluation notices to consumers.  The Consent Order also alleges that the servicer made first filings in foreclosure actions, moved for foreclosure judgment, and conducted foreclosure sales when the borrower was entitled to protection against these actions under the MSR.  According to the Consent Order, these prohibited foreclosure actions occurred because the servicer did not have adequate foreclosure policies and procedures in place.  Further, the CFPB alleges that even after developing foreclosure policies and procedures to comply with the MSR in March of 2014, the servicer distinguished between loss mitigation applications that requested a home retention loss mitigation option and those that sought a non-retention option.  The applicants for home retention options allegedly received foreclosure protections while applicants for non-retention options did not.  The CFPB pointed out in the Consent Order that, in general, the protections under the MSR apply to all loss mitigation applications, regardless of whether the borrower has a preference in retaining his or her home.

Next, the Consent Order alleges the servicer had inadequate policies and procedures regarding the acknowledgement and evaluation notices required by the MSR in connection with loss mitigation applications.  The Consent Order alleges that on and after January 10, 2014, the servicer had no policies and procedures regarding these notices, and once the servicer did implement such policies and procedures, they only covered retention applications.

The Consent Order requires the servicer to pay $1.15 million in redress.  Further, the servicer must record, maintain and track activities and events that evidence compliance with the MSR as information in 41 different data fields in the servicer’s information system.  The Consent Order requires the servicer to monitor and test various foreclosure activities to ensure compliance with the MSR.  Moreover, the servicer must train and re-train personnel and service providers on the new written policies and procedures required to be developed by this Consent Order. The servicer must also stop the foreclosure proceedings for affected consumers who were subject to foreclosure violations, and update and correct any information related to the foreclosure proceeding furnished by the servicer to any consumer reporting agency.

The Consent Order can be found here: https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/062017_cfpb_Fay_Servicing-consent_order.pdf.