CFPB settles with BSI Financial Services over numerous mortgage servicing issues

CFPB accused BSI of improperly handling mortgage servicing transfers

The Consumer Financial Protection Bureau announced Wednesday that an investigation into the business practices of BSI Financial Services found that the Texas-based mortgage servicer violated multiple federal laws over several years.

According to the CFPB, BSI’s mortgage servicing practices violated the Consumer Financial Protection Act of 2010, the Real Estate Settlement Procedures Act, or the Truth in Lending Act at various points between 2012 and 2016.

A CFPB investigation found that BSI improperly handled mortgage servicing transfers, including failing to recognize that certain loans were already in loss mitigation proceedings, in the process of receiving a loan modification, or had already received a loan modification.

According to the CFPB, BSI also violated federal law in the following ways:

  • Handling mortgage servicing transfers with incomplete or inaccurate escrow information resulting in untimely escrow disbursements
  • Inadequately overseeing service providers, resulting in untimely escrow disbursements to pay borrowers’ property taxes and homeowners’ insurance premiums
  • Failing to promptly enter interest rate adjustment loan data for adjustable rate mortgage loans into its servicing system, resulting in BSI sending monthly statements to consumers that sought to collect inaccurate principal and interest payments
  • Maintaining an inadequate document management system that prevented BSI’s personnel or consumers from readily obtaining accurate information about mortgage loans

More specifically, the CFPB found that between September 2012 and September 2014, BSI’s typical method did not include reviewing the loan data provided by prior servicers for accuracy before on-boarding new mortgages on its system.

Additionally, BSI did not have a fully automated method to enter loss mitigation information into its servicing system.

Those deficiencies led to BSI not recognizing an unknown number of servicing customers who had an in-process loan modification or were engaged in pending loss mitigation activity and failing to honor those loss mitigation proceedings.

Beyond that, from approximately September 2012 through approximately May 22, 2015, BSI did not properly maintain interest rate data received from previous servicers on “thousands of ARM loans.”

Instead, according to the CFPB, BSI manually created interest rate adjustment tables based on information contained in the underlying mortgage documents it received from the previous servicer.

This manual process “often did not keep pace with scheduled changes in interest rates on ARM loan,” the CFPB said. “During this time, (BSI) sent borrowers monthly statements seeking to collect principal and interest payments that did not reflect the correct interest rate on their ARM loans.”

BSI, for its part, noted that all of the conduct referenced by the CFPB took place several years ago, and said it settled the case to put the matter in the past.

“In April 2014, the CFPB had asserted that BSI Financial did not have an adequate information technology plan that included procedures to ensure the quality and completeness of loan data obtained from other servicers when boarding loans,” the company said in a statement.

“BSI has always been committed to delivering a high-quality customer experience to borrowers while complying with all applicable legal and regulatory requirements. The data integrity issues identified by the CFPB were isolated to loans that were boarded by BSI Financial prior to September 2014,” the company continued.

“While we regret any instance in which we did not comply with a regulatory requirement, we believe those cases were isolated incidents and have been resolved in the ordinary course of business,” the company added. “We reached this agreement with the CFPB in the interest of putting this matter behind us to focus on the needs of our clients, employees, and borrowers.”

As part of the settlement with the CFPB, BSI must pay a civil money penalty of $200,000 and pay restitution estimated to be at least $36,500.

BSI must also “establish and maintain a comprehensive data integrity program to ensure the accuracy, integrity, and completeness of the data for loans that it services, and implement an information technology plan to ensure BSI’s systems are appropriate give the nature, size, complexity, and scope of BSI’s operations,” the CFPB said.

To read the full consent order, click here.

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