CFPB Penalizes Bank for New Mortgage Servicing Rule Violations
The Consumer Financial Protection Bureau (CFPB) announced on September 29 that it took action against Flagstar Bank for violations related to the new mortgage servicing rules.
The CFPB ordered the bank to stop illegal activities, pay $27.5 million in restitution, and a $10 million fine. The bank, based in Michigan, ran afoul of the mortgage servicing rules as it severely limited borrowers’ ability to save their home in the foreclosure relief process. The bank was not devoting enough resources to manage its loss mitigation programs, and reviews of loss mitigation applications took up to nine months.
The CFPB found numerous mortgage servicing violations, including failing to alert borrowers about incomplete applications, miscalculated incomes, insufficient reasons for denying applications, misinforming borrowers about appeal options, and prolonged trial periods for loan modifications. Borrowers often needlessly went into foreclosure instead of taking advantage of loss mitigation programs.
CLA’s financial institution regulatory compliance team assists banks and credit unions nationwide in establishing regulatory compliance programs, conducting compliance testing, and training staff on regulations. Justin Robinson is a member of CLA’s regulatory compliance team and can be reached at justin.robinson@CLAconnect.com.
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