WASHINGTON–The Consumer Financial Protection Bureau has taken action and issued fines against two mortgage-related companies.
In its first action, the CFPB has filed a proposed order that would require Freedom Mortgage Corp. to pay a $3.95 million penalty for submitting “error-riddled” mortgage loan data to federal regulators.
In October 2023, the CFPB noted it sued the nonbank mortgage company for violating both the Home Mortgage Disclosure Act (HMDA) and a 2019 CFPB order.
Additional Stipulations
In addition to the civil money penalty, if entered by the court, the proposed stipulated judgment and order will require Freedom Mortgage to regularly audit, test, and correct the company’s HMDA data, the CFPB said.
According to the Bureau, Freedom Mortgage Corporation is a privately held nonbank mortgage loan originator and servicer headquartered in Boca Raton, Florida. In 2020, Freedom reported HMDA data on more than 700,000 mortgage loan applications and originated nearly 400,000 HMDA-reportable loans worth almost $100 billion.
Enforcement Action
If entered by the court, the CFPB’s proposed stipulated judgment and order will require Freedom Mortgage to:
- Prevent future HMDA violations. The order imposes injunctive relief designed to prevent future violations of the law by requiring Freedom Mortgage to regularly audit, test, and correct the company’s HMDA data.
- Pay a $3.95 million fine: The order requires Freedom Mortgage to pay a $3.95 million penalty to the CFPB’s victims relief fund.
Action Against Reverse Mortgage Firm
Separately, the CFPB has ordered a reverse mortgage servicing operation to stop illegal activities that it said harmed older homeowners and caused them to “fear losing their homes.”
The CFPB said it found that the customer service operation of Sutherland Global, its subsidiaries Sutherland Government Solutions and Sutherland Mortgage Services, and NOVAD Management Consulting, had inadequate resources and staffing to handle as many as 150,000 borrowers.
“This caused systematic failures to respond to thousands of homeowner requests for assistance, and caused financial harm to borrowers, including losing out on home sales and paying unnecessary costs,” the CFPB said.
Permanent Ban
The order permanently bans Sutherland Global, Sutherland Government Solutions, and NOVAD from engaging in reverse mortgage activities, imposes strict compliance requirements on future reverse mortgage activities of Sutherland Mortgage Services, requires the Sutherland companies to pay $11.5 million in redress to affected consumers, and requires all companies to pay a civil penalty of approximately $5 million, which will be deposited in the CFPB’s victims relief fund.
According to the CFPB, NOVAD is a nonbank company with headquarters in Landover, Md. Sutherland Global is based in Pittsford, N.Y.. Two Sutherland subsidiaries – Sutherland Mortgage Services and Sutherland Government Solutions – are also part of the action.
The CFPB said Sutherland and NOVAD formed a loan servicing operation to service reverse mortgages on behalf of the Department of Housing and Urban Development.
What the Law Says
“Under federal law, a servicer must respond to consumer requests for information about their loan in a timely manner,” the CFPB said, “That requirement is important to protect reverse mortgage borrowers, who remain responsible for property taxes, insurance, and other applicable fees and assessments. However, many borrowers could not get in contact with anyone at the loan servicing operation.
“In fact, the companies systematically failed to respond to thousands of homeowner requests for loan payoff statements, short sales, deeds-in-lieu of foreclosures, lien releases, and requests for general information,” the CFPB continued. “The companies allowed problems to fester to critical points, which resulted in borrowers losing out on home sales, paying unnecessary costs, and fearing foreclosure.”
The CFPB said it found Sutherland and NOVAD violated both the Consumer Financial Protection Act and the Real Estate Settlement Procedures Act.
The Specifics
Specifically, the companies harmed older adults with a reverse mortgage by:
- Hanging homeowners out to dry. “The failure by the companies to communicate stopped homeowners from being able to prove occupancy, obtain loan payoff statements, and complete alternatives to foreclosure.”
- Falsely telling homeowners they were in default. “The companies sent false repayment letters to older adult homeowners stating that their reverse mortgage loans were due and must be paid within 30 days due to a default condition, when no such trigger event had occurred. The companies would then improperly ignore attempts by reverse mortgage borrowers to address and correct the “due and payable” letters.”
Enforcement Action
Under the Consumer Financial Protection Act, the CFPB
The CFPB issued separate orders against Sutherland and NOVAD. Today’s CFPB order against Sutherland requires the company to:
- Cease reverse mortgage servicing activity: The order permanently bans Sutherland Global and Sutherland Government Solutions from reverse-mortgage servicing. It also imposes strict compliance requirements on Sutherland Mortgage Services should it engage in reverse mortgage activities in the future.
- Provide over $11 million in consumer redress: Sutherland must pay $11.5 million to reverse mortgage borrowers financially harmed by the company’s illegal activities.
- Pay $5 million in civil penalties: Sutherland must pay a civil penalty of $5 million to the CFPB, which will be deposited in the CFPB’s victims relief fund.
Order Against NOVAD
The CFPB order against NOVAD requires the company to:
- Permanently cease all reverse mortgage servicing activity: The order permanently bans NOVAD from reverse-mortgage servicing, including advertising, marketing, promoting, offering, selling, or servicing reverse mortgages.
- Pay a civil penalty: Due to NOVAD’s declaration of an inability to pay, the order requires NOVAD to pay $1 to the CFPB’s victims relief fund. By requiring NOVAD to pay at least $1 in penalties, the CFPB can make consumers eligible for additional relief
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