The Consumer Financial Protection Bureau yesterday announced an enforcement action against Fay Servicing, a nonbank mortgage servicer, for repeated violations of mortgage servicing laws and a previous enforcement order. The company has been ordered to pay $5 million in penalties and restitution while also being forced to invest at least $2 million to update its technology and compliance management systems. The consent order will also limit the compensation of the company’s CEO if it fails to meet its requirements going forward.
The big picture: This is the second enforcement action against Fay Servicing in six years, indicating ongoing compliance issues at the company despite previous regulatory intervention. The company was previously under a 2017 CFPB order addressing its illegal foreclosure practices.
- Fay Servcing also previously reached a settlement with the Attorney General of Massachusetts where the company paid more than $3 million to settle claims of making excessive collection calls and issues related to mortgage foreclosures.
What it did: The CFPB found that Fay Servicing violated several key laws, including the Real Estate Settlement Procedures Act, the Truth in Lending Act, and the Homeowners Protection Act. Notably, the company ignored the 2017 order, which was designed to protect homeowners from foreclosure while they sought mortgage assistance. Fay Servicing continued to move forward with foreclosures even when borrowers were eligible for relief, failed to inform borrowers of all available loss mitigation options, and improperly charged for PMI and late fees.
What happens next: Under the CFPB’s new order, Fay Servicing must make significant changes to its practices, including improving its internal controls, compliance systems, and customer communication protocols. The order also mandates ongoing oversight, with the company required to provide quarterly reports to the CFPB and its board of directors. This oversight will continue for at least five years, ensuring that Fay Servicing adheres to the law and the terms of the order.
The last word: “Fay Servicing ignored a law enforcement order by taking steps to foreclose on homeowners who are shielded by housing protection laws,” said CFPB Director Rohit Chopra. “The CFPB’s order will put the CEO’s pay at risk if Fay continues to break the law.”
