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CFPB Takes Legal Action Against Mortgage Servicer for Noncompliance

The Consumer Financial Protection Bureau (CFPB) announced Wednesday that they, after an investigation, found Fay Servicing, a Chicago-based mortgage servicer, in violation of federally mandated rules, and subsequently ordered restitution payments and system changes.

The CFPB’s investigation found that Fay Servicing did not take the steps required to keep their customers informed about the various options for foreclosure relief, nor did they inform their customers when additional information or documents were required to process their application.

The Bureau also claims that Fay Servicing did not send evaluations to customers who had completed applications for foreclosure relief with vital information as to what relief options were being offered, the deadline or deadlines to accept such relief, or the borrower’s rights in declining said relief, putting unnecessary responsibility on the borrower.

CFPB also said that, even though servicers are prohibited from moving forward with certain aspects of the foreclosure process, Fay Servicing sometimes began and completed the foreclosure even while borrowers were being considered for foreclosure relief.

The Bureau has ordered Fay Servicing must pay up to $1.15 million to consumers that were directly subject to the illegal practices listed above. Fay Servicing must also demonstrate that they engage customers on the verge of foreclosure with viable alternatives to foreclosure, and create policies and procedures that will maintain proper data tracking for borrower outreach.

“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,” said CFPB Director Richard Cordray. “CFPB will continue to hold servicers accountable for violations of consumer protection laws.”

Fay Servicing has agreed to pay the $1.15 million in redress to the affected borrowers. There will be no further penalty; and, moving forward, no monitor will be required.

Fay issued a statement, "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 isolated claims concern a small fraction of the more than 85,000 borrowers whose mortgages Fay Servicing has serviced since it was founded in 2008. While Fay regrets any instance in which it did not comply with a regulatory requirement, we believe the affected borrowers were well-served during the loss mitigation process . . . [t]he 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."

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