Loan Originator Compensation Requirements under the Truth in Lending Act (Regulation Z)

Consumer Financial Protection Bureau Takes Action Against Fay Servicing for Failing to Provide Mortgage Borrowers with Protections Against Foreclosure

WASHINGTON,
D.C.
– The Consumer
Financial Protection Bureau (CFPB) today took action against mortgage servicer
Fay Servicing for failing to provide mortgage borrowers with the protections against
foreclosure that are required by law. 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. The Bureau
also found instances where the servicer illegally launched or moved forward
with the foreclosure process while borrowers were actively seeking help to save
their homes. The CFPB has ordered Fay Servicing 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.”

Fay Servicing is a mortgage servicer based in Chicago, Ill. It
services loans for borrowers across the country. As a servicer, Fay Servicing
is responsible for, among other things, creating and sending monthly statements
to borrowers, collecting payments, and processing payments. For struggling
borrowers, it administers short sale and foreclosure relief programs offered by
the owner of the loan. These programs provide alternatives to foreclosure. Fay
Servicing is 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 is charged with enforcing the Dodd-Frank
Wall Street Reform and Consumer Protection Act and other federal consumer
financial laws. In addition, the Bureau adopted common-sense rules for the
mortgage servicing market that first took effect in January 2014. The CFPB’s mortgage servicing rules require servicers to
keep borrowers informed about requirements, options, and rights throughout the
process of applying for foreclosure relief. 
In certain cases, they also provide certain protections from foreclosure
proceedings during the application process. The CFPB’s investigation found that
Fay Servicing violated these federal rules while borrowers were attempting to
save their homes or find another alternative to foreclosure. Specifically, Fay
Servicing:

  • Kept
    borrowers in the dark about critical information about applying for foreclosure
    relief:
    As part of the requirements for keeping borrowers informed, servicers generally
    must send an acknowledgement notice when they receive an application for
    foreclosure relief. The notice must state whether and what additional documents
    or information are required from the borrower to complete the application. 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.  Fay Servicing failed to send or timely send
    both acknowledgment and evaluation notices with the relevant, correct
    information, putting the onus on borrowers to try to determine what else they
    had to do to attempt to save their homes or otherwise avoid foreclosure.
  • Illegally
    launched or moved forward with foreclosure process against borrowers who were applying
    for help:
    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 Servicing began, and in some cases
    completed, foreclosure proceedings even when homeowners were being considered
    for options to avoid foreclosure.  
Read about:   Hills Bank Mortgage Rates Review

Enforcement action

Under the Dodd-Frank Act, the CFPB is authorized to take action
against institutions engaged in unfair, deceptive, or abusive acts or
practices, or that otherwise violate federal consumer financial laws. Under
today’s consent order, Fay Servicing must:

  • Pay
    up to $1.15 million in redress to consumers:
    Fay Servicing
    must pay up to $1.15 million to consumers who were subject to these illegal
    servicing practices.
  • Offer
    borrowers opportunities to pursue foreclosure relief:
    Fay
    Servicing must also solicit consumers who were the subject of illegal actions to
    offer them the opportunity to pursue options to avoid foreclosure, to the
    extent possible. During the outreach and solicitation process, Fay Servicing
    must not take any foreclosure actions against the consumers. If the consumer
    responds to Fay Servicing’s solicitation within 60 days, Fay must not take any
    foreclosure actions against the consumer.
  • Stop
    illegal practices and comply with mortgage servicing rules:
    Fay
    Servicing must stop illegal practices and respond with timely and accurate acknowledgment
    and evaluation notices required under federal regulations.  Fay Servicing must also create policies and
    procedures that bring Fay Servicing’s operations into full compliance with the
    law, and make system changes to ensure Fay records data and tracks information that
    evidences compliance with federal law.

A copy of the consent order entered today is available at https://www.consumerfinance.gov/documents/4820/062017_cfpb_Fay_Servicing-consent_order.pdf ###

The Consumer Financial Protection Bureau is a 21st century agency that
helps consumer finance markets work by making rules more effective, by
consistently and fairly enforcing those rules, and by empowering consumers to
take more control over their economic lives. For more information, visit
consumerfinance.gov.

Read about:   Rocket Mortgage Rates | See This Week's Rates

7 thoughts on “Consumer Financial Protection Bureau Takes Action Against Fay Servicing for Failing to Provide Mortgage Borrowers with Protections Against Foreclosure

Leave a Reply

Your email address will not be published.