Carrington to pay $5.25M to CFPB for improper forbearance practices

The company said it is settling without admitting or denying the CFPB's claims

After two years of negotiations, California-based Carrington Mortgage Services has agreed to pay a $5.25 million penalty to the Consumer Financial Protection Bureau (CFPB) for ‘improper practices’ related to forbearance plans provided for homeowners during the Covid-19 pandemic, the parties announced on Thursday. 

“Carrington Mortgage unlawfully withheld legally mandated pandemic protections, wrongly imposed fees, and reported false information to credit reporting companies,” the CFPB’s director Rohit Chopra said in a statement. “Homeowners were misled and denied key protections at a time when they were in most need of help.”

Carrington, which operates in all 50 states and services many federally backed mortgage loans, said it is settling without admitting or denying the CFPB’s claims “to put this matter behind it and avoid the cost and distraction of prolonged litigation,” according to a news release.   

The CFPB claims the servicer denied forbearance for some borrowers and did not allow others to have 180 days upon request. The company also deceived consumers about their options, saying homeowners were required to remit their monthly payments immediately and could face foreclosure proceedings if they did not. 

In addition, CFPB said Carrington misled borrowers into paying improper late fees when in forbearance and inaccurately reported borrowers’ statuses to Equifax, Experian, and TransUnion as “delinquent” instead of “current,” even though the homeowners’ accounts were entering forbearance.

The Cares Act, approved by Congress in 2020, established that servicers had to provide forbearance plans to borrowers facing hardships related to the Covid-19 pandemic. Millions of U.S. homeowners applied for the programs with their servicers. 

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But, according to Carrington, servicers implemented the complex Cares Act regulatory requirements amid guidance that was scarce and, at times, inconsistent. Despite its best efforts, when its execution was not perfect, those issues were corrected by Carrington and, in any event, did not result in consumer harm, the company said. 

To prove its point, Carrington claims it completed more than 134,000 forbearance agreements – and over 94% of homeowners successfully resolved their delinquency after forbearance or remained in their plans as needed. In total, the company serves 650,000 borrowers.  

Bruce Rose, CEO and founder of The Carrington Companies, the parent company of Carrington, said the CFPB, failing to understand the business, uses extortion tactics as its primary tool for regulation, which does nothing to help the industry or consumers.

“This matter is an aggressive and unfortunate example of regulatory overreach,” Rose said.

The U.S. Court of Appeals for the Fifth Circuit recently declared the CFPB’s funding source unconstitutional. The bureau receives funding through the Federal Reserve rather than appropriations legislation passed by Congress. 

The settlement requires that Carrington conduct an audit to identify borrowers improperly charged with late fees who still need to be refunded. The company will also improve its staff training and establish procedures to prevent the issues from recurring. 

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