CFPB Brings First Enforcement Action under Regs X and Z

In the first of what should be many The Consumer Finance Protection Bureau entered into a $37.5 Million settlement with Flagstar Mortgage today.

The CFPB outlined conduct that our office has attacked on behalf of our clients since the new Federal Servicing Regulation went into effect on January 10 of this Year.

Flagstar was cited for the following conduct that violates Federal TILA and RESPA laws.

  • Closed borrower applications due to its own excessive delays: Flagstar took excessive time to review loss mitigation applications, often causing application documents to expire. To move its backlog, Flagstar would close applications due to expired documents, even though the documents had expired because of Flagstar’s delay.
  • Delayed approving or denying borrower applications: Under the new CFPB mortgage servicing rules, Flagstar must evaluate a complete loss mitigation application within 30 days, if it receives the complete application more than 37 days before a foreclosure sale. Flagstar also failed to adhere to these timelines.
  • Failed to alert borrowers about incomplete applications: Flagstar is responsible for reviewing borrowers’ initial loss mitigation applications to determine what documents are missing. It must then tell borrowers what documents are missing, usually by sending a “missing document” letter. Flagstar failed to send, or delayed sending, missing document letters to borrowers.
  • Miscalculated incomes: Eligibility for some loss mitigation programs, such as a loan modification, is highly dependent on borrower income. If borrowers have too much or too little income, they do not qualify. Flagstar routinely miscalculated borrower income and wrongfully denied loan modifications.
  • Denied applications for unspecified reasons: Under the CFPB’s new rules, mortgage servicers must provide the specific reason a complete loan modification application is rejected. Flagstar’s policy was to say only “not approved for loss mitigation options by the investor/owner of the loan,” even though Flagstar’s internal systems contained the true reason for the denial.
  • Misinformed borrowers about their appeal rights: Under the CFPB’s new rules, Flagstar must provide certain borrowers the right to appeal the denial of a loan modification. But Flagstar failed to provide this notice, and it wrongly stated that borrowers have an appeal right only if they reside in certain states.
  • Put borrowers in trial period purgatory: Flagstar needlessly prolonged trial periods for loan modifications. This caused some borrowers’ loan amount under the modified note to increase and, in some cases, jeopardized borrowers’ permanent loan modification.

Consumers and Homeowners who encounter such conduct from their own loan servicer have a right under the new CFPB regulations to bring an action in Federal Court for Damages against their mortgage company. The Dann Law Firm has been on the forefront of bringing claims under Regulations X and Z.

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One comment on “CFPB Brings First Enforcement Action under Regs X and Z
  1. I am in licking county Ohio I have been fighting for modification through Citi mortgage. For 6+ years. The have done so Much illegal step I would like to talk with you.

    Thanks

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