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CFPB Hits Servicer for Creating "Loan Modification Purgatory"

by devteam August 1st, 2015 | Share

A Texasrnmortgage servicer has run badly afoul of the Consumer Financial ProtectionrnBureau (CFPB) for repeated violations of servicing rules.  Residential Credit Solutions has agreed tornpay $1.5 million in restitution to its victims and a $100,000 civil money penaltyrnunder a consent agreement announced on Thursday.</p

CFPBrnhas a laundry list of complaints against the company which bills itself as specializingrnin servicing delinquent and “credit sensitive” mortgages loans.  Since 2009 approximately 75,000 borrowersrnhave had loans transferred from other servicers to the company which has aboutrn$95 million in assets.</p

Thisrnenforcement action covers Residential Credit Solutions’ illegal practices priorrnto the January 2014 effective date of the CFPB’s new mortgage servicingrnrules. CFPB said the company:</p<ul type="disc"

  • Failed to honorrn trial loan modifications that consumers had entered into with their priorrn servicers. The company’s practice from at least 2009 to 2013 was to notrn honor those agreements but instead to insist that consumers re-qualify forrn the modifications. “The company treated these consumers as if they werern still in default, subjecting them to collection calls, late fees, andrn default and delinquency notices. Many consumers had their loans referred to foreclosure,rn and some eventually lost their homes. </li</ul<ul type="disc"
  • Provided consumers with incorrect information on the in-processrn modifications they refused to recognize such as unpaid balances, paymentrn due dates, interest rates, monthly payment amounts and delinquency status.
    </li
  • Sent required annual escrow account statements to consumers that misrepresentedrn the amount ofrn any surplus funds which are required to be refunded to a consumer whosern loan payments are current. Many of the escrow statements that Residentialrn Credit Solutions sent to delinquent consumers incorrectly stated that theyrn had an escrow surplus of between $80 and $10,000. </li</ul<ul type="disc"
  • When the companyrn did offer a payment plans to consumers allowing them to make additionalrn payments over a defined period of time to bring their loan current itrn illegally required consumers to surrender certain legal rights in futurern foreclosures and bankruptcy protections as a condition of receiving thatrn plan. </li</ul

    CFPBrnsays the company’s actions put customers in loan modification trials in “loanrnmodification purgatory,” confusing them, and effectively setting them back as thoughrnthey had never received a trial modification. In many cases the company delayedrnor deprived borrowers of the opportunity to save or sell their homes. </p

    In addition to the civilrnpenalty and redress to victims, who are not prevented by the payments from takingrnindividual action against Residential Credit Solutions, the company has agreedrnto convert in-process loan modifications into permanent ones and engage inrnoutreach efforts to offer borrowers loss mitigation options.  It will also stop foreclosure processes forrncertain borrowers, if those are happening and honor plans put in place by priorrnservicers, continue processing applications for loss mitigation and end allrnmortgage servicing violations.

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    • About the Author

    devteam

    Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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