Last week, the Consumer Financial Protection Bureau took action against Fay Servicing, a mortgage servicer, for violations of the Dodd-Frank Act. The bureau alleges that Fay engaged in “unfair, deceptive, or abusive acts or practices” in servicing the mortgage loans of consumers seeking foreclosure relief. The consent order can be found here.
Fay Servicing, based in Chicago, services loans for borrowers across the country. The CFPB notes that as a servicer, Fay is required to provide assistance to struggling borrowers, such as short sale and foreclosure relief programs offered by the owner of the loan. Servicers are responsible for soliciting borrowers for these programs, responding to their applications in a timely way, determining eligibility, and implementing the foreclosure relief program for qualified borrowers.
The CFPB alleges that Fay violated the law in two ways. First, the company failed to provide borrowers with critical information about the process of applying for foreclosure relief. Servicers generally must send an acknowledgment notice when they receive an application for foreclosure relief, which must state whether and what additional documents or information are required from the borrower. After a borrower completes the application, servicers must also generally send an evaluation notice spelling out what foreclosure relief options they are offering, the deadline to accept or reject the offer, and the rights borrowers have to appeal a servicer’s decision to deny certain types of relief. According to the bureau, Fay Servicing failed to send or timely send both acknowledgment and evaluation notices with the relevant, correct information.
In addition, a CFPB investigation found instances where Fay illegally launched or moved forward with the foreclosure process while borrowers were actively seeking help to save their homes. When borrowers timely submit a complete application during certain time periods, a servicer is prohibited from starting or moving forward with various aspects of the foreclosure process for prescribed periods of time. Fay began, and in some cases completed, foreclosure proceedings even when homeowners were being considered for options to avoid it.
The CFPB has ordered Fay to stop its illegal practices and pay up to $1.15 million to harmed borrowers. “The bureau found that Fay violated the CFPB’s servicing rules by keeping borrowers in the dark about critical information about the process of applying for foreclosure relief,” said CFPB Director Richard Cordray. “CFPB will continue to hold servicers accountable for violations of consumer protection laws.”