WASHINGTON (9/30/14)--Violations of the Consumer Financial Protection Bureau's (CFPB) new mortgage servicing rules resulted in the bureau ordering Flagstar Bank to pay $37.5 million, according to the CFPB. The Michigan-based mortgage servicer is alleged to have illegally blocked borrowers' attempts to save their homes, and as a result will pay $27.5 million to victims and a $10 million fine, which will go to the CFPB's civil penalty fund.
The CFPB said in a statement that Flagstar failed borrowers "at every step in the foreclosure relief process."
Flagstar administers foreclosure relief programs provided by the owner of the loan, which are meant to mitigate losses for both the borrower and the owners of the loans by providing alternatives to foreclosure.
CFPB examinations and an investigation found that from 2011 to the present, Flagstar failed to devote sufficient resources to administering loss mitigation programs for distressed homeowners. For example, in 2011, Flagstar had 13,000 active loss mitigation applications but only assigned 25 full-time employees and a third-party vendor in India to review them.
Specifically, the Bureau found that Flagstar:
In addition to the fines, the bureau has ordered Flagstar to end all loss mitigation mortgage servicing violations and stop acquiring default servicing rights from third parties.
Use the resource link below to access the CFPB's consent order.