United States

CFPB issues enforcement action for mortgage servicing rules violations

COMPLIANCE NEWS  | 

The Consumer Financial Protection Bureau (Bureau) has issued a press release announcing the first enforcement action for alleged violations of the loss mitigation requirements of the 2013 mortgage servicing rules. In prepared remarks, CFPB Director Richard Cordray referred to this enforcement action as signaling “a new era of enforcement to protect consumers against the cost of servicer runarounds.” 

In the consent order, the Bureau alleges that the Michigan-based bank violated the mortgage servicing rules by:

  • Failing to timely acknowledge receipt of loss mitigation applications in accordance with section 1024.41(b) of Regulation X  
  • Failing to make decisions regarding loss mitigation applications and to notify borrowers of those decisions, and failing to advise borrowers of their right to appeal the denial of a loan modification option as required in section 1024.41(c) of Regulation X  
  • Failing to maintain reasonable policies and procedures as required in section 1024.38 of Regulation X

The consent order also alleges the bank engaged in unfair, deceptive, or abusive acts or practices in violation of the Consumer Financial Protection Act by:

  • Withholding information borrowers needed to complete loss mitigation applications  
  • Improperly denying borrower's requests for loan modifications  
  • Improperly prolonging trial periods for loan modifications   

In addition to the administrative prohibitions and requirements under the terms of the consent order, the bank is also required to pay $27.5 million in redress and $10 million in civil money penalties.