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22 SPOTLIGHT: CFPB A LOOK AT THE LATEST NEWS FROM THE CONSUMER FINANCIAL PROTECTION BUREAU CFPB ENFORCES MORTGAGE SERVICING RULES FOR THE FIRST TIME In its first enforcement action stemming from the new mortgage servicing rules, the Consumer Financial Protection Bureau (CFPB) ordered Michigan-based bank Flagstar to pay $37.5 million in penalties for violating the new mortgage servicing rules by failing to devote sufficient resources to its foreclosure prevention programs, CFPB announced on Monday. CFPB said that Flagstar illegally blocked borrowers' efforts to avoid foreclosure by un- necessarily delaying the processing of foreclo- sure relief applications, intentionally delaying permanent loan modifications, failing to notify borrowers when their applications for foreclosure relief were incomplete, and denying qualified borrowers of loan modifications. Flagstar was ordered to pay $27.5 million in restitution to the victims and an additional $10 million fine, totaling $37.5 million in penalties, according to CFPB. "Because of Flagstar's illegal actions and unacceptable delays, struggling homeowners lost the opportunity to save their homes," CFPB Director Richard Cordray said. "e Bureau has been clear that mortgage servicers must follow our new servicing rules and treat homeown- ers fairly. Today's action signals a new era of enforcement to protect consumers against the cost of servicer runarounds." Flagstar, a federal savings bank and mortgage servicer, is responsible for soliciting borrowers for its loss mitigation programs and subsequently processing the applications, deter- mining borrowers' eligibility, and implementing the programs to qualified borrowers. e Bureau's investigation found that Flagstar failed consumers "at every step of the foreclosure process" by not devoting suffi- cient resources toward implementing the loss mitigation programs. CFPB discovered upon examination that during 2011 and continuing on into 2014, Flagstar had more than 13,000 active loss mitigation applications but only 25 full-time employees and a third-party vendor in India re- viewing them, increasing the wait time to review a single application to nine months in some cases and pushing the number of Flagstar's backlogged applications to more than 1,000. CFPB found that the average wait time to Flagstar's loss mitigation call center was 25 minutes, with more than 50 percent of calls being abandoned. CFPB found Flagstar's actions to be in violation of the new mortgage servicing rules with respect to loss mitigation that went into effect in January 2014. e alleged violations began in 2011 and continued on into 2014, CFPB said. CFPB Director Richard Cordray said in a press call on Monday that his Bureau will not tolerate violations of the new mortgage servicing rules. "ese new regulations establish specific rules of the road for handling loss mitigation applica- tions," Cordray said. "Since we first announced these rules almost two years ago, we have made it clear that we expect full compliance to clean up the problems that had been pervasive in this industry and caused so many people to lose their homes. Consumers must not be hurt by illegal servicing any more. When mortgage servicers fail to treat people fairly, we will vigorously enforce the law." Cordray said it is vital that mortgage servicers follow the law because of the "central role" they play in borrowers' lives. "(Servicers) are the link between a mortgage borrower and a mortgage owner," Cordray said. "ey collect and apply payments, work out modifications to the loan terms, and handle the difficult process of foreclosure. Importantly, consumers cannot take their business elsewhere. Instead, they are stuck with their mortgage ser- vicer, whether they are treated well or poorly." "e Bureau has been clear that mortgage servicers must follow our new servicing rules and treat homeowners fairly," Cordray said. "Today's action signals a new era of enforcement to protect consumers against the cost of servicer runarounds. e financial crisis is still fresh in our minds, and too many homeowners continue to feel its effects. We need all mortgage servicers to understand that they must step up and follow the law. We are working very hard to fulfill this objective."

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