On April 11, 2018, New York’s Department of Financial Services (DFS) announced that it had entered into a consent order with a national mortgage company settling claims of illegal origination and servicing practices.
The settlement results from examinations of the DFS into the company’s lending activities, which focused on a three-year time period between 2011 and 2014. Through its examinations, DFS concluded that the company’s operations did not effectively account for its rapid growth, ultimately harming consumers. Specifically, DFS identified various violations of New York Banking Law, including: (i) failure to obtain authorization for the use of several domain names; (ii) origination and servicing record-keeping failures; (iii) failure to timely fund loans; (iv) unauthorized operation of two branch locations; (v) failure to maintain fee schedule on the company’s website; (vi) failure to timely submit quarterly reports; and (vii) failure to file 90-day pre-foreclosure notices with DFS.
The consent order requires the company to pay $5 million in civil penalties to DFS and donate $5 million in residential property or first-lien mortgages to non-profit organizations for the purpose of rehabilitating vacant and abandoned properties in New York. In the order, the company also acknowledges that it has provided New York borrowers with more than $7 million in restitution or waived fees related to issues uncovered during DFS’s examinations. In addition to the monetary payments, the company is required to obtain an independent consultant to assess the sufficiency of any measures implemented to address the claimed deficiencies in the company’s operations.