Bank Fined $10 Million by CFPB for Violating New Mortgage Servicing Rules

Earlier this week, on September 29, 2014, the Consumer Financial Protection Bureau (“CFPB”) took action against Michigan-based Flagstar Bank, fining it $10 million and ordering $27.5 million in payments to consumers. Flagstar allegedly “took excessive time to process borrowers’ applications for foreclosure relief, failed to tell borrowers when their applications were incomplete, denied loan modifications to qualified borrowers, and illegally delayed finalizing permanent loan modifications.” Consequently, the CFPB concluded that Flagstar illegally blocked borrowers’ attempts to save their homes.

One conclusion from the CFPB’s examinations and investigations related to Flagstar’s processing statistics for loss mitigation. The CFPB found that 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. For a period of time, it took the staff up to nine months to review a single application. In Flagstar’s call center, the average call wait time was 25 minutes and the average call abandonment rate was almost 50 percent. Additionally, when the CFPB’s new mortgage servicing rules went into effect in January 2014, Flagstar committed violations of the new rules with respect to loss mitigation.

Click here to read the report.

Click here to read the consent order.

It is clear that the CFPB’s grace period for complying with new mortgage servicing rules has long since passed, and current examinations are focusing on historic and current compliance trends. If your institution has questions about the 2014 mortgage servicing rules, please contact Spilman.



by R. Scott Adams

R. Scott Adams


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