The Consumer Financial Protection Bureau moved this week to fine CitiBank affiliate CitiMortgage $28.8 million for violating the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on deceptive acts or practices. The consent order can be found here.
“Citi’s subsidiaries gave the runaround to borrowers who were already struggling with their mortgage payments and trying to save their homes,” said CFPB Director Richard Cordray. “Consumers were kept in the dark about their options or burdened with excessive paperwork. This action will put money back in consumers’ pockets and make sure borrowers can get help they need.”
According to the CFPB, CitiMortgage “kept consumers in the dark” about foreclosure relief options. When borrowers applied to have their payments deferred, CitiMortgage failed to consider it as a request for foreclosure relief options and so did not disclose various loss mitigation options as required by CFPB mortgage servicing rules. The rules include helping borrowers complete their applications and considering them for all available foreclosure relief alternatives.
The Bureau also alleges that CitiMortgage eluded and diverted borrowers seeking relief. When borrowers applied for foreclosure relief CitiMortgage demanded “dozens of documents and forms that had no bearing on the application or that the consumer had already provided.” Many were actually not needed to complete the application, the CFPB added.
The consent order also alleges that CitiMortgage misled consumers about the impact of deferring payment due dates. Borrowers were led into thinking that if they deferred a payment, the additional interest would be added to the end of the loan rather than become due when the deferment ended. In fact, the deferred interest became due immediately. As a result, more of the borrowers’ payment went to pay interest on the loan instead of principal when they resumed making payments, which made it harder for borrowers to pay down their loan principal.
Finally, CitiMortgage allegedly failed to properly investigate consumer disputes and was found to have reported inaccurate information to credit reporting agencies. CitiMortgage regularly sent the agencies “bad information” that settled accounts were “charged off,” an indication that the borrower was delinquent.
CitiMortgage neither admitted nor denied the charges, but has agreed to pay $17 million to compensate wronged consumers, pay a civil penalty of $3 million, refund approximately $4.4 million to consumers, and pay a civil penalty of $4.4 million directly to the bureau. They must also freeze all foreclosure-related activity until new procedures can be implemented.