[Editor's Update: Adds quote from Ed Fay, CEO of Fay Servicing.]
The Consumer Financial Protection Bureau announced Wednesday that it is fining Fay Servicing more than $1 million for “illegal foreclosure practices.”
According to the CFPB, an investigation found that Fay Servicing was “keeping borrowers in the dark” about their foreclosure prevention options.
The bureau also said that Fay Servicing “illegally launched or moved forward with the foreclosure process while borrowers were actively seeking help to save their homes,” a practice sometimes referred to as “dual tracking.”
For these violations, the CFPB is ordering Fay Servicing to pay up to $1.15 million to consumers who were subjected to the company’s “illegal servicing practices.”
In a statement, Fay Servicing notes that no penalty was assessed and no monitor is required going forward as part of the settlement. The company also said that it reached the agreement with the CFPB in the interest of putting this matter behind it and focusing on the needs of its clients and borrowers.
Further, the CEO of Fay Servicing, Ed Fay, objects to the use of the term "fine" to describe the penalty and offered this explantion in a Letter To The Editor, dated June 9, 2017:
"The CFPB’s consent order and the statement on our website both make clear that Fay was asked to pay $1.15 in redress to borrowers; to offer borrowers opportunities to pursue foreclosure relief; and comply with mortgage servicing rules.
Fay was not asked to pay a fine, otherwise known as a civil penalty payment.
The isolated claims concern a small fraction of the more than 85,000 borrowers whose mortgages Fay Servicing has serviced during the last decade. While we regret any instance in which we did not comply with a regulatory requirement, we believe the affected borrowers were well-served during the loss mitigation process using Fay’s high-touch and borrower-centric approach to servicing severely delinquent loans."
According to the CFPB, its investigation found that Fay Servicing violated the bureau’s mortgage servicing rules related to borrowers’ foreclosure rights.
The CFPB’s mortgage servicing rules stipulate that servicers must keep borrowers informed about requirements, options, and rights throughout the process of applying for foreclosure relief. Additionally, the servicer must also provide certain protections from foreclosure proceedings during the application process in certain cases.
And according to the CFPB, Fay Servicing violated these federal rules in several ways, including (details directly from the CFPB):
Keeping borrowers in the dark about critical information about applying for foreclosure relief:
As part of the requirements for keeping borrowers informed, servicers generally must send an acknowledgement notice when they receive an application for foreclosure relief. The notice must state whether and what additional documents or information are required from the borrower to complete the application.
After a borrower completes the application, servicers must also generally send an evaluation notice spelling out what foreclosure relief options they are offering, the deadline to accept or reject the offer, and the rights borrowers have to appeal a servicer’s decision to deny certain types of relief.
Fay Servicing failed to send or timely send both acknowledgment and evaluation notices with the relevant, correct information. This put the onus on borrowers to try to determine what else they had to do to attempt to save their homes or otherwise avoid foreclosure.
Illegally launched or moved forward with foreclosure process against borrowers who were applying for help:
When borrowers submit a complete application during certain time periods, a servicer is prohibited from starting or moving forward with various aspects of the foreclosure process for prescribed periods of time. Fay Servicing began, and in some cases completed, foreclosure proceedings even when homeowners were being considered for options to avoid foreclosure.
In addition to being required to pay as much as $1.15 million to the affected borrowers, the CFPB is also requiring Fay Servicing to contact the consumers who were the subject the company’s illegal actions and offer them the opportunity to pursue options to avoid foreclosure, to the extent possible.
During that process, Fay Servicing is not allowed to take any foreclosure actions against those borrowers, the CFPB said. Then, if the consumer responds to Fay Servicing’s communications within 60 days, the company is prohibited from taking any foreclosure actions against the consumer.
Additionally, Fay Servicing is ordered to stop its illegal practices and comply with mortgage servicing rules, the CFPB said.
According to the CFPB, the company is ordered to respond to borrowers with timely and accurate acknowledgment and evaluation notices as required under federal regulations.
“Fay Servicing must also create policies and procedures that bring Fay Servicing’s operations into full compliance with the law, and make system changes to ensure Fay records data and tracks information that evidences compliance with federal law,” the CFPB said in a release.
“The Bureau found that Fay violated the CFPB’s servicing rules by keeping borrowers in the dark about critical information about the process of applying for foreclosure relief,” CFPB Director Richard Cordray said. “CFPB will continue to hold servicers accountable for violations of consumer protection laws.
“Fay has always been committed to delivering a high-quality customer service experience to borrowers while complying with all applicable legal and regulatory requirements,” the company said in a statement.
“The company reached this agreement with the CFPB in the interest of putting this matter behind it and focusing on the needs of its clients, employees, and borrowers,” the company concluded.
[Update: This article is updated with a statement from Fay Servicing]