WASHINGTON—The Consumer Financial Protection Bureau has ordered Fay Servicing to pay a $2 million penalty for violations of mortgage servicing laws, as well as for violations of a 2017 agency order that addressed its illegal foreclosure practices.
“The company failed to implement the order’s requirements and continued to break the law,” the Bureau stated. “Fay Servicing took prohibited foreclosure actions against borrowers requesting mortgage assistance, failed to offer borrowers mortgage assistance options available to them, and overcharged for private mortgage insurance.”
In addition to the civil money penalty, the CFPB’s order requires Fay Servicing to pay consumer redress of $3 million and to invest $2 million to update its servicing technology and compliance management systems.
The order also puts compensation limits on Edward Fay, the company’s chairman of the board and chief executive office, if Fay does not take actions necessary to ensure compliance with the order, the agency said.
About the Company
Fay Servicing is a nonbank mortgage servicer that is a Delaware LLC with its principal place of business in Tampa. It services mortgage loans of borrowers across the country.
In 2017, the CFPB noted it took action against Fay Servicing for failing to provide mortgage borrowers with the protections against foreclosure that are required by consumer financial protection law. The CFPB said it found the company kept borrowers in the dark about critical information about the process of applying for foreclosure relief.
The CFPB said it also found instances where the servicer illegally launched or moved forward with the foreclosure process when borrowers were actively seeking help to save their homes. The CFPB ordered Fay Servicing to stop its illegal practices and to pay $1.15 million to harmed borrowers.
Newest Action Taken
In the latest action, the CFPB said it found Fay Servicing violated the 2017 order, the Real Estate Settlement Procedures Act, the Truth in Lending Act, the Homeowners Protection Act, and the Consumer Financial Protection Act.
The agency said Fay Servicing took prohibited foreclosure actions against borrowers seeking mortgage assistance and prevented borrowers from taking advantage of the foreclosure relief options available to them.
The Allegations
According to the CFPB, Fay Servicing harmed borrowers by:
- Flouting a law enforcement order and violating rules that protect borrowers from prohibited foreclosure activities. “The 2017 order required Fay Servicing to change its practices, policies, and procedures to ensure it provided mortgage borrowers with protections against prohibited foreclosure activities. However, Fay Servicing continued to engage prohibited foreclosure activities, failed to timely place holds on foreclosures, and failed to develop written policies and procedures to ensure compliance.”
- Failing to provide full information to borrowers about their loss mitigation options. “When borrowers apply for loss mitigation, the company’s application asks for their loss mitigation preference,” the CFPB said. “Fay Servicing failed to inform borrowers how the preference they indicated could end up limiting the options for which Fay Servicing would evaluate the borrowers.”
- Overcharging for private mortgage insurance and late fees. Fay “Servicing did not stop collecting private mortgage insurance on time, which meant homeowners were forced to overpay for private mortgage insurance that was not required. The company also charged late fees higher than allowed by homeowners’ mortgage contracts.”
What’s Been Ordered
The CFPB’s order requires Fay Servicing to:
- Pay redress for harmed consumers. The order requires Fay Servicing to pay $3 million in consumer redress for consumers against whom the company took illegal foreclosure actions and from whom Fay Servicing collected private mortgage insurance overpayments.
- Limit CEO compensation if Fay fails to meet the order’s requirements. The order puts limitations on compensation to Fay if he does not take actions necessary to ensure compliance with today’s order.
- Update its servicing technology and compliance systems. Fay Servicing must invest at least $2 million to update its servicing technology and compliance management systems.
- Pay a $2 million fine. Fay Servicing must pay a $2 million penalty, which will be deposited into the CFPB’s victims relief fund.