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The Consumer Financial Protection Bureau (CFPB) has settled a case with Florida-based Fay Servicing over illegal conduct in foreclosures. The deal includes a $2 million fine and potential limitations to the CEO’s compensation.
A company spokesperson wrote to HousingWire that “Fay continues to strongly disagree with the CFPB’s claims in this matter, but we made a business decision to settle.”
“While we disagree with the CFPB’s positions, we are pleased to put this matter behind us so that we can remain focused on what we do best: supporting homeowners across the country, including during times of financial hardship,” the spokesperson added.
A CFPB order issued on Wednesday mentions violations of mortgage servicing laws and of a previous 2017 order that addresses the same issue. Fay Servicing “failed to implement the 2017 measures and continued to break the law,” the CFPB claims.
The company was also ordered to pay customers $3 million, invest at least $2 million to update its technology and compliance management systems, and limit chairman and CEO Edward Fay’s compensation if he doesn’t ensure compliance with the current order.
In 2017, the CFPB accused Fay Servicing of failing to provide borrowers with protections against foreclosure, keeping them “in the dark” about critical information on the foreclosure-relief application process. At that time, the CFPB ordered the company to stop its illegal practices and to pay $1.15 million to impacted customers.
The current order, however, mentions that Fay Servicing failed to place holds on foreclosures in timely fashion, and that it did not develop written policies and procedures to ensure compliance.
It also mentions that when borrowers sought loss-mitigation options, Fay Servicing did not inform them of how their preference could limit the options for which the company would evaluate them.
In addition, the company did not stop collecting private mortgage insurance on time and charged late fees that were higher than the mortgage contracts allowed for.
“Fay Servicing ignored a law enforcement order by taking steps to foreclose on homeowners who are shielded by housing protection laws,” CFPB Director Rohit Chopra said in a statement. “The CFPB’s order will put the CEO’s pay at risk if Fay continues to break the law.”
The company spokesperson said that Fay helped “thousands of homeowners across the country stay in their homes using borrower-friendly processes that are at the center of this matter, and that were disclosed to the CFPB as far back as 2017.”
“However, after a decade of cooperation and transparency with the CFPB, including throughout this investigation, we were faced with a choice: engage in a lengthy litigation process to defend our record, or agree to a resolution that, without admitting to the Bureau’s claims, would allow us to move forward. We chose to settle this case so that we can focus our time and efforts on supporting borrowers.”
The spokesperson added that “CFPB’s heavy-handed approach is one our industry is all too familiar with, and in this case, does nothing to help borrowers or the industry. At the same time, the CFPB’s decision to reference our CEO in this resolution is a tactic based on an agenda item to include CEOs, albeit one that it seems to apply disproportionally to smaller companies.”
