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CFPB Cites Bank Subsidiaries for Deceiving Struggling Homeowners

Tue 14 Feb, 2017  /  by McIntyre & Lemon  /   Client Alerts

02/14/17 – The Consumer Financial Protection Bureau (CFPB) has a pair of actions against two mortgage servicer subsidiaries of a major national bank for giving homeowners incorrect information about foreclosure relief options.

According to the CFPB, the mortgage servicers failed to fully explain options to avoid foreclosure or requested “excessive” paperwork when homeowners applied for foreclosure relief.

The CFPB alleges that one of the mortgage servicers violated 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 when it advised consumer who were having trouble making their mortgage payments on-time. Specifically, the mortgage servicer:

  • Did not explain foreclosure relief options when a consumer informed the mortgage servicer that the consumer was having financial difficulties or when the consumer requested to differ mortgage payments;
  • Did not explain or misled consumers about the effect of a payment deferment on interest payments;
  • Charged consumers for credit insurance that should have been canceled;
  • Prematurely canceled credit insurance for some borrowers;
  • Sent inaccurate consumer information to credit reporting companies; and
  • Failed to investigate consumer disputes regarding the inaccurate consumer information that was sent to the credit reporting companies.

The CFPB alleges that the other mortgage servicer violated the Real Estate Settlement Procedures Act and the Dodd-Frank Act’s prohibition against deceptive acts or practices. According the CFPB, when a consumer asked the mortgage servicer to apply for foreclosure relief, the mortgage servicer sent the consumer a letter requesting dozens of documents and forms that had no bearing on the consumer’s application or that the consumer had already provided. Many of these requested documents were unrelated to the borrower’s financial circumstances and were not needed to complete the application.

Under the consent order, The CFPB is requiring the mortgage servicer to pay an estimated $17 million to compensate wronged consumers, and pay a civil penalty of $3 million; and requiring the financial services group to refund approximately $4.4 million to consumers, and pay a civil penalty of $4.4 million.

CFPB Press Release, Consent Order 1, Consent Order 2.