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CFPB Warns Loan Servicers to Prepare for Wave of Mortgage Foreclosures This Fall

By Jeff Sorg, OnlineEd Blog

(April 1, 2021)

“There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months.”

WASHINGTON, D.C. –The Consumer Financial Protection Bureau (CFPB) today warned mortgage servicers to take all necessary steps now to prevent a wave of avoidable foreclosures this fall. Millions of homeowners currently in forbearance will need help from their servicers when the pandemic-related federal emergency mortgage protections expire this summer and fall. Servicers should dedicate sufficient resources and staff now to ensure they are prepared for a surge in borrowers needing help. The CFPB will closely monitor how servicers engage with borrowers, respond to borrower requests, and process applications for loss mitigation. The CFPB will consider a servicer’s overall effectiveness in helping consumers when using its discretion to address compliance issues that arise.

“There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months. Responsible servicers should be preparing now. There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming,” said CFPB Acting Director Dave Uejio. “Our first priority is ensuring struggling families get the assistance they need. Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families.” The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides borrowers with federally-backed mortgages with access to forbearance, and private lenders have also provided similar assistance. As of January 2021, approximately 2.7 million borrowers remained in such programs, with 2.1 million borrowers in forbearance and at least 90 days delinquent on their mortgage payments. Another 242,000 mortgages not in forbearance programs were at least 90 days delinquent. Industry data suggest that nearly 1.7 million borrowers will exit forbearance programs in September and the following months, with many of them a year or more behind on their mortgage payments. Beginning with the expiration of the federal foreclosure moratoriums at the end of June 2021, mortgage servicers will need ramped-up capacity to reach out and respond to the large number of homeowners likely to need loss mitigation assistance. To meet this surge, servicers will need to plan now. In its oversight of mortgage servicers, the CFPB is focused on preventing avoidable foreclosures. The CFPB will pay particular attention to how well servicers are:

  • Being proactive. Servicers should contact borrowers in forbearance before the end of the forbearance period so they have time to apply for help.
  • Working with borrowers. Servicers should work to ensure borrowers have all necessary information and should help borrowers in obtaining documents and other information needed to evaluate the borrowers for assistance.
  • Addressing language access. The CFPB will look carefully at how servicers manage communications with borrowers with limited English proficiency and maintain compliance with the Equal Credit Opportunity Act and other laws.
  • Evaluating income fairly. Where servicers use income in determining eligibility for loss mitigation options, servicers should evaluate borrowers’ income from public assistance, child-support, alimony or other sources in accordance with the Equal Credit Opportunity Act’s anti-discrimination protections.
  • Handling inquiries promptly. The CFPB will closely examine servicer conduct where hold times are longer than industry averages.
  • Preventing avoidable foreclosures. The CFPB will expect servicers to comply with foreclosure restrictions in Regulation X and other federal and state restrictions in order to ensure that all homeowners have an opportunity to save their homes before foreclosure is initiated.

Provided that servicers are demonstrating effectiveness in helping consumers, in accord with today’s compliance bulletin, the CFPB will continue to evaluate servicer activity consistent with the Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act on April 3, 2020, which provides flexibility on certain timing requirements in the regulations.

[Source: CFPB Media Release]

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of publication date but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices, and all other information may or may not be correct in the future and should be verified if cited, shared, or otherwise republished.

OnlineEd® is a Registered Trademark.

Over 11 Million Families at Risk of Losing Housing

Federal foreclosure moratorium slated to end June 30, 2021

By Jeff Sorg, OnlineEd Blog

(March 1, 2021)

CFPB, WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) issued a report that warns of widespread evictions and foreclosures once federal, state, and local pandemic protections come to an end, absent additional public and private action. Over 11 million families are behind on their rent or mortgage payments: 2.1 million families are behind at least three months on mortgage payments, while 8.8 million are behind on rent. Homeowners alone are estimated to owe almost $90 billion in missed payments. The last time this many families were behind on their mortgages was during the Great Recession.

According to the CFPB report:

  • Black and Hispanic families are more than twice as likely to report being behind on housing payments than white families.
  • While mortgage forbearance – the option to pause or reduce payments temporarily – has dropped foreclosures to historic lows, 1 million homeowners are more than 90 days behind on payments and are likely to experience severe financial hardship when payments resume. Of these families, an estimated 263,000 families are seriously behind on their mortgages and not in forbearance, putting them at higher risk of foreclosure once federal and state moratoria end.
  • 9 percent of renters, who do not have the same protections or options as homeowners, report that they are likely to be evicted.
  • Black and Hispanic households are more likely to report being at risk.
  • 28 percent of manufactured home residents reported being behind on their housing payments, compared to 12 percent of single-family home residents and 18 percent of residents in small-to-mid-sized multi-unit buildings.

The CFPB report, “Housing Insecurity and the COVID-19 Pandemic,” can be found here: Housing insecurity and the COVID-19 pandemic.

 

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OnlineEd® is a Registered Trademark. For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

OnlineEd blog postings are the opinion of the author. Nothing posted in this or any other article is intended as legal or any other type of professional advice. Be sure to consult an appropriate professional when professional advice is needed. Excerpts from articles not originating with Jeff Sorg/OnlineEd are reprinted with permission; remain the author’s sole property; no permission to reprint articles or portions thereof not arising from this blog but reprinted here is given or implied. Information in this posting is deemed correct as of the date of publication. Still, the author does not guarantee articles to be accurate, and information may have been obtained from third-party sources and cannot be further verified for correctness. Due to the subject matter’s fluid nature, information may or may not be correct after the publication date and should be verified.

Freedom Mortgage Corp. to Pay $1.75 Million Penalty

CFPB settles with Freedom Mortgage Corporation

By Jeff Sorg, OnlineEd Blog

(June 5, 2019)

(WASHINGTON, D.C.) CFPB – The Consumer Financial Protection Bureau (Bureau) today announced a settlement with Freedom Mortgage Corporation (Freedom), one of the ten largest Home Mortgage Disclosure Act (HMDA) reporters nationwide.

Freedom is a mortgage lender with its principal place of business in Mount Laurel, N.J. For each year from 2013 through 2016, it originated more than 50,000 home-purchase loans, including refinancings of home-purchase loans. Freedom is required to collect, record, and report data on HMDA-covered transactions to comply with HMDA and Regulation C.

According to the consent order, the Bureau found that Freedom violated HMDA and Regulation C by submitting mortgage-loan data for 2014 to 2017 that contained errors. The Bureau found that Freedom reported inaccurate race, ethnicity, and sex information and that much of Freedom’s loan officers’ recording of this incorrect information was intentional. For example, certain loan officers were told by managers or other loan officers that, when applicants did not provide their race or ethnicity, they should select non-Hispanic white regardless of whether that was accurate.

Under the terms of the consent order, Freedom must pay a civil money penalty of $1.75 million and take steps to improve its compliance management to prevent future violations.

Read the consent order with all the details: https://files.consumerfinance.gov/f/documents/cfpb_freedom-mortgage-corporation_stipulation_2019-06.pdf

[source: CFPB press release]

 

 

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OnlineEd blog postings are the opinion of the author and not intended as legal or other professional advice. Be sure to consult the appropriate party when professional advice is needed.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

CFPB Orders Meridian Title to Pay up to Pay up to $1.25 million & Disclose its Interests in Future Transactions

CFPB Takes Action Against Settlement Services Provider for Steering Consumers to Affiliated Business

By Jeff Sorg, OnlineEd Blog

(October 2, 2017)

canstockphoto24908732consumer protectionThe Consumer Financial Protection Bureau (CFPB) took action against real estate settlement services provider Meridian Title Corporation for steering consumers to a title insurer owned in part by several of its executives without making disclosures about the businesses’ affiliation. The CFPB found that Meridian failed to disclose its relationship with the title insurer and illegally benefitted from the referrals for title insurance—which is usually required in real estate purchases involving a mortgage loan. Under today’s consent order, the CFPB is ordering Meridian to ensure that it ceases the illegal practice, provide disclosures whenever it makes a covered referral, and pay up to $1.25 million in redress to consumers.

“Meridian Title illegally steered consumers into purchasing a product from an affiliated company to add to its bottom line,” said CFPB Director Richard Cordray. “We’re ordering it to halt this practice and pay up to $1.25 million to consumers who were harmed.”

Meridian Title Corporation is a real estate settlement agent and title insurance agency headquartered in South Bend, Indiana. As a settlement agent, Meridian provides real estate settlement services and conducts loan closings in connection with residential real estate transactions. Lenders normally require title insurance to protect their interests when providing a mortgage loan in the event someone else can collect on a lien or there are back taxes owed on the property. Consumers are normally able to select the title insurance provider during the home-buying process, as long as the title insurance policy complies with lender requirements. As a title insurance agent, Meridian receives orders for title insurance policies from lenders and real estate agents, and in some cases directly from consumers, and assigns those orders to title insurance underwriters.

The CFPB found that Meridian routinely selected Arsenal Insurance Corporation, a company owned in part by three of Meridian’s own executives, as the title insurance underwriter for its customers. When it selected Arsenal, the CFPB found that Meridian was able to keep extra money beyond the commission it would normally have been entitled to collect, based on an understanding that Meridian would select Arsenal as underwriter. A company like Meridian that receives anything of value pursuant to an agreement or understanding that business will be referred to an affiliated business like Arsenal must generally disclose its relationship to the consumer in question, among other conditions, in order to avoid a violation of the Real Estate Settlement Procedures Act. In its investigation, the CFPB found that Meridian failed to make the necessary disclosures to more than 7,000 consumers when it selected Arsenal to provide title insurance and also did not satisfy other conditions for avoiding a violation of the law.

Enforcement Action
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions or individuals violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices. The CFPB’s order requires Meridian to:

  • Pay up to $1.25 million to harmed consumers: Under the order, Meridian is required to pay up to $1.25 million in redress to consumers who were referred to and purchased title insurance from Arsenal but did not receive appropriate disclosures.
  • Stop violating the law and start providing disclosures: Meridian must not violate the Real Estate Settlement Procedures Act and must implement policies and procedures to ensure it properly discloses to consumers whenever it makes an applicable referral.

A copy of the consent order filed today is available at: http://files.consumerfinance.gov/f/documents/201709_cfpb_meridian-title-corp_consent-order.pdf

[Source: CFPB press release]

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Nationstar Mortgage to Pay $1.75 for Home Mortgage Disclosure Act (HMDA) Violations

$1.75 Million Civil Penalty is the CFPB’s Largest  for HMDA Violations

By Jeff Sorg, OnlineEd Blog

canstockphoto19773822 compliance 1(March 16, 2017) – WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) has ordered Nationstar Mortgage LLC to pay a $1.75 million civil penalty for violating the Home Mortgage Disclosure Act (HMDA) by consistently failing to report accurate data about mortgage transactions for 2012 through 2014. This action is the largest HMDA civil penalty imposed by the Bureau to date, which stems from Nationstar’s market size, the substantial magnitude of its errors, and its history of previous violations. Nationstar had been on notice since 2011 of HMDA compliance problems.

In addition to paying the civil penalty, Nationstar must take the necessary steps this time to improve its compliance management and prevent future violations.

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

CITI Subsidiaries to Pay $28.8 Million for Giving the Runaround to Borrowers Trying to Save Their Homes

Mortgage Servicers Kept Borrowers in the Dark About Options, Demanded Excessive Paperwork

By Jeff Sorg, OnlineEd Blog

briefcase with money(January 23, 2017) – The Consumer Financial Protection Bureau (CFPB) today took separate actions against CitiFinancial Servicing and CitiMortgage, Inc. for giving the runaround to struggling homeowners seeking options to save their homes. The mortgage servicers kept borrowers in the dark about options to avoid foreclosure or burdened them with excessive paperwork demands in applying for foreclosure relief. The CFPB is requiring CitiMortgage to pay an estimated $17 million to compensate wronged consumers, and pay a civil penalty of $3 million; and requiring CitiFinancial Services to refund approximately $4.4 million to consumers, and pay a civil penalty of $4.4 million.

“Citi’s subsidiaries gave the runaround to borrowers who were already struggling with their mortgage payments and trying to save their homes,” said CFPB Director Richard Cordray. “Consumers were kept in the dark about their options or burdened with excessive paperwork. This action will put money back in consumers’ pockets and make sure borrowers can get help they need.” 

CitiFinancial Servicing
CitiFinancial Servicing is made up of four entities incorporated in Delaware, Minnesota, and West Virginia, and headquartered in O’Fallon, Mo. All are direct subsidiaries of CitiFinancial Credit Company, and an indirect subsidiary of New York-based Citigroup, Inc. As a mortgage servicer, CitiFinancial Servicing collects payments from borrowers for loans it originates. It also handles customer service, collections, loan modifications, and foreclosures.

CitiFinancial Servicing originates and services residential daily simple interest mortgage loans. With these loans, the interest amount due is calculated on a day-to-day basis, unlike a typical mortgage, where interest is calculated monthly. With a daily simple interest loan, the consumer owes less interest and pays more toward principal when they make monthly payments before the due date. But if payments are late or irregular, more of the consumer’s payment goes to pay interest. Some consumers who notified CitiFinancial Servicing that they faced a financial hardship were offered “deferments.” This postponed the consumer’s next payment due date, and the consumer could still be considered current on payments. But CitiFinancial Servicing did not treat a deferment as a request for foreclosure relief options, also called loss mitigation options, as required by CFPB mortgage servicing rules.

CitiFinancial Servicing violated the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on deceptive acts or practices. Specifically, CitiFinancial Servicing:

  • Kept consumers in the dark about foreclosure relief options: When borrowers applied to have their payments deferred, CitiFinancial Servicing failed to consider it as a request for foreclosure relief options. As a result, borrowers may have missed out on options that may have been more appropriate for them. Such requests for foreclosure relief trigger protections required by CFPB mortgage servicing rules. The rules include helping borrowers complete their applications and considering them for all available foreclosure relief alternatives.
  • Misled consumers about the impact of deferring payment due dates:Consumers were kept in the dark about the true impact of postponing a payment due date. CitiFinancial Servicing misled borrowers into thinking that if they deferred the payment, the additional interest would be added to the end of the loan rather than become due when the deferment ended. In fact, the deferred interest became due immediately. As a result, more of the borrowers’ payment went to pay interest on the loan instead of principal when they resumed making payments. This made it harder for borrowers to pay down their loan principal.
  • Charged consumers for credit insurance that should have been canceled: Some borrowers bought CitiFinancial Servicing credit insurance, which is meant to cover the loan if the borrower can’t make the payments. Borrowers paid the credit insurance premium as part of their mortgage payment. Under its terms, CitiFinancial Servicing was supposed to cancel the insurance if the borrower missed four or more monthly payments. But between July 2011 and April 30, 2015, about 7,800 borrowers paid for credit insurance that CitiFinancial Servicing should have canceled under those terms. These payments were still directed to insurance premiums instead of unpaid interest, making it harder for borrowers to pay down their loan principal.
  • Prematurely canceled credit insurance for some borrowers: CitiFinancial Servicing prematurely canceled credit insurance for some consumers. Some of those borrowers later had claims denied because CitiFinancial Servicing had improperly canceled their insurance.
  • Sent inaccurate consumer information to credit reporting companies: CitiFinancial Servicing incorrectly reported some settled accounts as being charged off. A charged-off account is one the bank deems unlikely to be repaid, but may sell to a debt buyer. At times, the servicer continued to send inaccurate information about these accounts to credit reporting companies, and didn’t correct bad information it had already sent.
  • Failed to investigate consumer disputes: CitiFinancial did not investigate consumer disputes about incorrect information sent to credit reporting companies within the required time period. In some instances, they ignored a “notice of error” sent by consumers, which should have stopped the servicer from sending negative information to credit reporting companies for 60 days.

Under the consent order, CitiFinancial Servicing must:

  • Pay $4.4 million in restitution to consumers: CitiFinancial Services must pay $4.4 million to wronged consumers who were charged premiums on credit insurance after it should be been canceled, or who were denied claims for insurance that was canceled prematurely.
  • Clearly disclose conditions of deferments for loans: CitiFinancial Servicing must make clear to consumers that interest accruing on daily simple interest loans during the deferment period becomes immediately due when the borrower resumes making payments. This means more of the borrowers’ loan payment will go toward paying interest instead of principal. CitiFinancial Servicing must also treat a consumer’s request for a deferment as a request for a loss mitigation option under the Bureau’s mortgage servicing rules.
  • Stop supplying bad information to credit reporting companies: CitiFinancial Servicing must stop reporting settled accounts as charged off to credit report companies, and stop sending negative information to those companies within 60 days after receiving a notice of error from a consumer. CitiFinancial Servicing must also investigate direct disputes from borrowers within 30 days.
  • Pay a civil money penalty: CitiFinancial Servicing must pay $4.4 million to the CFPB Civil Penalty Fund for illegal acts. 

The consent order against Citi Financial Services is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_CitiFinancial-consent-order.pdf

CitiMortgage
CitiMortgage is incorporated in New York, headquartered in O’Fallon, Mo., and is a subsidiary of Citibank, N.A. CitiMortgage is a mortgage servicer for Citibank and government-sponsored entities such as Fannie Mae and Freddie Mac. It also fields consumer requests for foreclosure relief, such as repayment plans, loan modification, or short sales.

Borrowers at risk of foreclosure or otherwise struggling with their mortgage payments can apply to their servicer for foreclosure relief. In this process, the servicer requests documentation of the borrower’s finances for evaluation. Under CFPB rules, if a borrower does not submit all the required documentation with the initial application, servicers must let the borrowers know what additional documents are required and keep copies of all documents that are sent.

However, some borrowers who asked for assistance were sent a letter by CitiMortgage demanding dozens of documents and forms that had no bearing on the application or that the consumer had already provided. Many of these documents had nothing to do with a borrower’s financial circumstances and were actually not needed to complete the application. Letters sent to borrowers in 2014 requested documents with descriptions such as “teacher contract,” and “Social Security award letter.” CitiMortgage sent such letters to about 41,000 consumers.

In doing so, CitiMortgage violated the Real Estate Settlement Procedures Act, and the Dodd-Frank Act’s prohibition against deceptive acts or practices. Under the terms of the consent order, CitiMortgage must:

  • Pay $17 million to wronged consumers: CitiMortgage must pay $17 million to  approximately 41,000 consumers who received improper letters from CitiMortgage. CitiMortgage must identify affected consumers and mail each a bank check of the amount owed, along with a restitution notification letter.
  • Clearly identify documents consumers need when applying for foreclosure relief: If it does not get sufficient information from borrowers applying for foreclosure relief, CitiMortgage must comply with the Bureau’s mortgage servicing rules. The company must clearly identify specific documents or information needed from the borrower and whether any information needs to be resubmitted. Or it must provide the forms that a borrower must complete with the application, and describe any documents borrowers have to submit.
  • Freeze any foreclosures related to the flawed application process and reach out to harmed consumers: For consumers covered under the order who never received a decision on their application, CitiMortgage must stop all foreclosure-related activity, and reach out to these borrowers to determine if they want foreclosure relief options.
  • Pay a civil money penalty: CitiMortgage must pay $3 million to the CFPB Civil Penalty Fund for illegal acts.

The consent order reflects that CitiMortgage took affirmative steps to reach out to some borrowers before it may have been required to by CFPB rules. While those borrowers also would have benefited from more tailored and accurate notices, and the institution will provide compliant notices to them going forward, those individuals were not included the affected group of consumers in this settlement. This will avoid penalizing the institution for making additional effort, which the Bureau encourages other institutions to make as well.   

The consent order against CitiMortgage is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_CitiMortgage-consent-order.pdf

[Source: CFPB press release]

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

CFPB Takes Action Against Reverse Mortgage Lenders

The CFPB has long warned against deceptive reverse mortgage advertising

By Jeff Sorg, OnlineEd Blog

stack of 100 dollar bills(December 7, 2016) –  Today the Consumer Financial Protection Bureau (CFPB) took action against three reverse mortgage companies for deceptive advertisements, including claiming that consumers could not lose their homes. The CFPB is ordering American Advisors Group, Reverse Mortgage Solutions, and Aegean Financial to cease deceptive advertising practices, implement systems to ensure they are complying with all laws, and pay penalties.

“These companies tricked consumers into believing they could not lose their homes with a reverse mortgage,” said CFPB Director Richard Cordray. “All mortgage brokers and lenders need to abide by federal advertising disclosure requirements in promoting their products.”

A reverse mortgage is a special type of home loan that allows homeowners who are 62 or older to access the equity they have built up in their homes and defer payment of the loan until they pass away, sell, or move out. The loan proceeds are generally provided to the borrowers as lump-sum payments, monthly payments, or as lines of credit. Homeowners remain responsible for payment of taxes, insurance and home maintenance, among other obligations.

The Mortgage Acts and Practices Advertising Rule prohibits misleading claims in mortgage advertising. In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits institutions from engaging in deceptive acts or practices, including with regard to advertising of consumer financial products or services.

American Advisors Group – American Advisors Group, headquartered in Orange, Calif., is licensed in 49 states and the District of Columbia. It is the largest reverse mortgage lender in the United States. The company ran television advertisements almost daily and disseminated its information kit to approximately 1 million consumers. The information kit included a DVD and several brochures with information about reverse mortgage products.

Through its investigation, the CFPB found that since January 2012 American Advisors Group’s advertisements misrepresented that consumers could not lose their home and that they would have the right to stay in their home for the rest of their lives. The company also falsely told potential customers that they would have no monthly payments and that with a reverse mortgage they would be able to pay off all debts. In fact, consumers with a reverse mortgage still have payments and can default and lose their home if they fail to comply with the loan terms. These terms require, among other things, paying property taxes, making homeowner’s insurance payments, and paying for property maintenance. Moreover, a reverse mortgage is a debt and therefore cannot be used to eliminate all of a consumer’s debt.

Under the terms of today’s consent order, the company must make clear and prominent disclosures in its reverse mortgage advertisements and implement a system to ensure it is following all laws. It will also pay a civil penalty of $400,000.

Reverse Mortgage Solutions – Reverse Mortgage Solutions, headquartered in Houston, Texas, is licensed to conduct business in 48 states. The company marketed its product through various media, including television, radio, print, direct mail, and the Internet.

Through its investigation, the CFPB found that since January 2012 Reverse Mortgage Solutions’ advertisements misrepresented that consumers could not lose their home and that they would have the right to stay in their home for the rest of their lives. The company also falsely told potential customers that they would have no payments with a reverse mortgage and that they would “always retain ownership” and “can’t be forced to leave.” In fact, consumers with a reverse mortgage still have payments and can default and lose their home if they fail to comply with the loan terms. These terms require, among other things, paying property taxes, making homeowner’s insurance payments, and paying for property maintenance.

The CFPB also alleges that the company misrepresented that heirs would inherit the home, without disclosing any conditions of the inheritance. In fact, heirs frequently are not able to keep the home after the death of a consumer with a reverse mortgage. Heirs are only allowed to retain ownership of the home after the consumer’s death if they either repay the reverse mortgage or pay 95 percent of the assessed value of the home.

The company also created a false sense of urgency to buy the reverse mortgage product and misrepresented that time limits constrained the availability of a reverse mortgage. For example, one call script required representatives to tell potential customers that if they didn’t call back by close of business, they would “turn your file down and you will miss out on a tremendous money-saving opportunity.” In fact, it was not a limited time offer. Lastly, the company misrepresented that a reverse mortgage could “eliminate debt.” In fact, a reverse mortgage is a debt and therefore cannot be used to eliminate all of a consumer’s debt.

Under the terms of today’s consent order, the company must make clear and prominent disclosures in its reverse mortgage advertisements and implement a system to ensure it is following all laws. It will also pay a civil penalty of $325,000.

Aegean Financial – Aegean Financial, headquartered in El Segundo, Calif., is licensed to conduct business in California, Louisiana, Oregon, Texas, and Washington. The company also operates under multiple names in the jurisdictions in which it is licensed. Under the name Jubilados Financial, the company advertises reverse mortgages to Spanish-speaking consumers in California. Under the name Reverse Mortgage Professionals, the company advertises reverse mortgages in California, Oregon, Washington, and Texas. Aegean Financial markets its product across various media, including print, direct mail, radio, and the Internet.

Through its investigation, the CFPB found that since 2012, Aegean Financial’s advertisements misrepresented that consumers could not lose their home and that they would have the right to stay in their home for the rest of their lives. The reverse mortgage broker also falsely told potential customers that they would have no payments with a reverse mortgage and claimed that consumers would not be subject to costs associated with refinancing a reverse mortgage. In fact, consumers who refinance reverse mortgages do incur costs, including credit report fees, flood certification fees, title insurance costs, appraisal costs, and other closing costs. And consumers with a reverse mortgage still have payments and can default and lose their home if they fail to comply with the loan terms. These terms require, among other things, paying property taxes, making homeowner’s insurance payments, and paying for property maintenance.

The CFPB also alleges that the company falsely affiliated itself with the government in its Spanish-language advertisements. For example, one advertisement said, “if you are 62 years old or older and you own a house, we have good news for you; you qualify for a reverse mortgage from the United States Housing Department.” In fact, although the Department of Housing and Urban Development provides insurance for the most popular type of reverse mortgage, a reverse mortgage is not a government benefit or a loan from the government. Nor is the product endorsed or sponsored by the government. The disclosures associated with Aegean Financial’s advertisements were in small type or rapidly recited at the end of commercials. The CFPB also alleges that the company failed to keep records of its advertisements as required by law.

Under the terms of today’s consent order, the company cannot imply affiliation with the government, must make clear and prominent disclosures in its reverse mortgage advertisements, implement a system to ensure it is following all laws, and maintain complete and accurate records. It will also pay a civil penalty of $65,000.

A copy of the American Advisors Group consent order can be found at:http://files.consumerfinance.gov/f/documents/201612_cfpb_AmericanAdvisorsGroup-consentorder.pdf

A copy of the Reverse Mortgage Solutions consent order can be found at:http://files.consumerfinance.gov/f/documents/201612_cfpb_ReverseMortgageSolutions-consentorder.pdf

A copy of the Aegean Financial consent order can be found at:http://files.consumerfinance.gov/f/documents/201612_cfpb_AegeanFinancial-consentorder.pdf

The CFPB has long warned of the dangers associated with misleading and deceptive reverse mortgage advertising given the complexity of the product and the consumers to whom the product is offered. For example, in a June 2012 Report to Congress on Reverse Mortgages, the CFPB stated that “[f]alse and misleading advertising poses a serious risk to consumers.” The CFPB also published a June 2015 study, and accompanying advisory warning, reaffirming the risk to consumers as a result of deceptive and misleading reverse mortgage advertising.

[Source: CFPB press release]

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Court Orders CFPB to Restructure – Gives President Power to Fire Director

CFPB structure ruled “unconstitutional” but can continue to operate

By Jeff Sorg, OnlineEd Blog

(October 11, 2016) – A U.S. Court of Appeals for the District of Columbia ruling orders a restructuring of the CFPB that allows for giving the president the power to supervise the CFPB’s director and remove him from that position at will.

The ruling declared the way the CFPB is structured to be unconstitutional because it gives too much power to one individual, its director.

U.S. Circuit Judge Brett Kavanaugh  wrote that the way the CFPB is structured “poses a far greater risk of arbitrary decision making and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency.”

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

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CFPB Fines Wells Fargo $100 Million for Opening Covert Credit Card Accounts

Spurred by sales targets and compensation incentives, employees boosted sales figures by covertly opening accounts and funding them by transferring funds without consumer consent

By Jeff Sorg, OnlineEd Blog

(September 8, 2016) – In a press release today, the Consumer Financial Protection Bureau (CFPB) announced that is has fined Wells Fargo Bank, N.A. $100 million for the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts. Spurred by sales targets and compensation incentives, employees boosted sales figures by covertly opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often racking up fees or other charges. According to the bank’s own analysis, employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers. Wells Fargo will pay full restitution to all victims and a $100 million fine to the CFPB’s Civil Penalty Fund. The bank will also pay an additional $35 million penalty to the Office of the Comptroller of the Currency, and another $50 million to the City and County of Los Angeles.

“Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses,” said CFPB Director Richard Cordray. “Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed. Today’s action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences.”

According to today’s enforcement action, thousands of Wells Fargo employees illegally enrolled consumers in these products and services without their knowledge or consent in order to obtain financial compensation for meeting sales targets. The Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits unfair, deceptive, and abusive acts and practices. Wells Fargo’s violations include:

  • Opening deposit accounts and transferring funds without authorization:According to the bank’s own analysis, employees opened roughly 1.5 million deposit accounts that may not have been authorized by consumers. Employees then transferred funds from consumers’ authorized accounts to temporarily fund the new, unauthorized accounts. This widespread practice gave the employees credit for opening the new accounts, allowing them to earn additional compensation and to meet the bank’s sales goals. Consumers, in turn, were sometimes harmed because the bank charged them for insufficient funds or overdraft fees because the money was not in their original accounts.
  • Applying for credit card accounts without authorization: According to the bank’s own analysis, Wells Fargo employees applied for roughly 565,000 credit card accounts that may not have been authorized by consumers. On those unauthorized credit cards, many consumers incurred annual fees, as well as associated finance or interest charges and other fees.
  • Issuing and activating debit cards without authorization: Wells Fargo employees requested and issued debit cards without consumers’ knowledge or consent, going so far as to create PINs without telling consumers.
  • Creating phony email addresses to enroll consumers in online-banking services: Wells Fargo employees created phony email addresses not belonging to consumers to enroll them in online-banking services without their knowledge or consent.

The full text of the CFPB’s Consent Order can be found at:http://files.consumerfinance.gov/f/documents/092016_cfpb_WFBconsentorder.pdf

[Source: CFPB press release]

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

States Urge Rule to Prevent Banks from Forcing Customers into Binding Arbitration

States Ask the CFPB to Protect Banking Consumers’ Access to Justice

By Jeff Sorg, OnlineEd Blog

canstockphoto7251937 arbitration clause(August 17, 2016) – –– Attorney General Karl A. Racine today joined his peers from 18 states in sending a letter to the Consumer Financial Protection Bureau (CFPB) urging the agency to adopt rules that would limit the use of arbitration clauses in consumer financial products and services contracts and increase transparency in the arbitration process overall. Use of these clauses can effectively prevent consumers from suing their bank or other financial institution over wrongdoing.

Many contracts required to purchase common consumer financial products, like credit cards and bank accounts, include these mandatory arbitration clauses. The clauses prevent consumers from joining class action lawsuits – making it more difficult for consumers to sue corporations, particularly if the individual amounts of money in dispute are relatively small. In March 2015, the CFPB released a study that showed that very few consumers ever bring – or think to bring – individual actions against their financial service providers either in court or arbitration.

“Consumers must have reasonable access to courts when they have been wronged by their bank,” Attorney General Racine said. “The ever-increasing use of binding arbitration agreements has severely reduced the ability of consumers to protect themselves by going to court. We are urging the CFPB to adopt these rules to provide much-needed oversight and help retain consumers’ access to the justice system.”

The letter was co-authored by Attorney General Racine and his counterparts in California, Massachusetts, and New York. The letter, joined by 15 other states, urges the CFPB to adopt rules that would protect consumers by preventing financial companies from including mandatory arbitration clauses that prohibit class action lawsuits. The proposed rules would also require financial companies that use arbitration clauses to submit data to the CFPB concerning arbitration claim filings and awards, enabling the CFPB to better monitor and evaluate the impact of arbitration clauses on consumers.

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark