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Consumer Finance Insights
April 21, 2015

National Mortgage Servicing Company Enters Proposed Consent Order Over Loss-Mitigation Activities

The Consumer Financial Protection Bureau (“CFPB”) announced that it and the Federal Trade Commission (FTC) entered into  a Proposed Consent Order with  a national mortgage servicing company over allegations that its loss-mitigation activities violated the Federal Trade Commission Act (“FTCA”), the Consumer Financial Protection Act (“CFPA”), the Fair Debt Collection Practices Act (“FDCPA”), the Fair Credit Reporting Act (“FCRA”) and the Real Estate Settlement Procedures Act (“RESPA”). The FTC and CFPB simultaneously filed a Complaint in the U.S. District Court for the District of Minnesota. According to the Complaint, the company told homeowners seeking loan modifications that they must make loan payments first, which is a violation of guidelines issues by the Home Affordable Modification Program (“HAMP”). The Complaint also alleges that the company failed to respond timely to homeowners’ requests for approval of a short sale under the Home Affordable Foreclosure Alternative (“HAFA”) program. And when the company would acquire servicing rights of a mortgage in the process of a loan modification, the company allegedly would fail to honor the previous servicer’s modification agreement. The agencies also allege that the company refused to correct inaccurate data in mortgage loans it acquired from other servicers, revealed the status of debts to third parties, pressured consumer to use a particular payment system, withdrew payments from consumers’ accounts without authorization and made inaccurate reports to credit agencies.

The Proposed Consent Order imposes $48,000,000 in equitable monetary relief, including $18,000,000 for the company’s alleged misrepresentations related to fees, and $30,000,000 for alleged misrepresentations and delays over short sales and qualified written loan modification requests. The Proposed Consent Order also imposes a $15,000,000 civil monetary penalty. The injunctive relief includes adoption of a comprehensive data integrity program, implementation of a home preservation plan for affected borrowers and injunctions against further misrepresentations and violations related to the agencies’ findings and certain transfers of servicing rights for loans in loss mitigation.