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Financial Services Law Insights and Observations

CFPB announces $5.5 million loss mitigation settlement

Federal Issues CFPB Enforcement RESPA Regulation X CFPA Consent Order Unfair Deceptive UDAAP Loss Mitigation

Federal Issues

On December 18, the CFPB announced a settlement with a mortgage servicer for allegedly violating the CFPA and RESPA’s implementing regulation, Regulation X, due to widespread failures in the handling and processing of homeowners’ applications for loss mitigation options. According to the consent order, which was entered with the mortgage servicer’s successor in interest, the mortgage servicer violated Regulation X by, among other things, failing to (i) state in the acknowledgement notices the additional documents and information borrowers needed to submit to complete loss mitigation applications; (ii) provide a reasonable due date for submission of borrower documents; (iii) properly evaluate borrowers for all loss mitigation options available to them; and (iv) treat certain applications as “facially complete” in accordance with Regulation X. Additionally, the consent order states that the servicer’s alleged failure to “accurately review, process, track, and communicate to borrowers information regarding their applications for loss mitigation options” is an unfair act or practice and the alleged failure to send accurate acknowledgement notices is a deceptive act or practice. The Bureau asserts that the servicer’s failures delayed or deprived some borrowers of a reasonable opportunity to obtain the benefits of a loss mitigation option, resulting in additional harm such as negative credit reporting, additional late fees, and additional interest.

The consent order requires the successor in interest to pay nearly $5 million in total redress to over 11,000 consumers. The consent order also imposes a $500,000 civil money penalty and includes requirements for operational changes should the successor in interest resume mortgage servicing operations.

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