CFPB orders Fay Servicing to pay $2 million due to illegal foreclosure practices
The Consumer Financial Protection Bureau (CFPB) settled a case with its headquarters in Florida Fay Maintenance about illegal behavior in bankruptcies. The deal includes a $2 million fine and possible restrictions on CEO compensation.
A company spokesperson wrote HousingWire that “Fay continues to strongly disagree with the CFPB’s allegations in this matter, but we have made a business decision to reach a settlement.”
“While we disagree with the CFPB’s positions, we are pleased to put this matter behind us so we can continue to focus on what we do best: supporting homeowners across the country, even during times of financial hardship,” the spokesperson added.
A CFPB order issued Wednesday, reports violations of mortgage laws and a previous decision from 2017 addressing the same issue. Fay Servicing “failed to implement the 2017 measures and continued to violate the law,” the CFPB alleges.
The company was also ordered to pay customers $3 million, invest at least $2 million in updating its technology and compliance management systems, and limit chairman and CEO Edward Fay’s compensation if he fails to ensure the current order is complied with.
In 2017, the CFPB accused Fay Servicing of failing to provide borrowers with protection from foreclosure, leaving them “in the dark” about crucial information about the foreclosure relief application process. At the time, the CFPB ordered the company to stop its illegal practices and pay $1.15 million to affected customers.
However, the current order notes that Fay Servicing has failed to stop foreclosures in a timely manner and has not developed written policies and procedures to ensure compliance.
It also notes that when borrowers began seeking loss mitigation options, Fay Servicing did not inform them of how their preferences could limit the options for which the company would evaluate them.
In addition, the company failed to obtain private mortgage insurance on time and charged late fees that were higher than allowed in the mortgage contracts.
“Fay Servicing ignored a law enforcement order by taking steps to foreclose on homeowners protected by home protection laws,” CFPB Director Rohit Chopra said in a statement. “The CFPB’s order will jeopardize the CEO’s compensation if Fay continues to violate the law.”
The company spokesperson said Fay has “helped thousands of homeowners across the country remain in their homes using borrower-friendly processes at the heart of this issue, which were disclosed to the CFPB as early as 2017.”
“However, after a decade of cooperation and transparency with the CFPB, including during this investigation, we were faced with a choice: pursue a lengthy lawsuit to defend our reputation, or agree to a resolution that, without admitting the Bureau’s claims, giving, , would allow us to move forward. We have chosen to settle this case so that we can focus our time and efforts on supporting borrowers.”
The spokesperson added that “the 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 engage CEOs, even though it appears to apply disproportionately to smaller companies.”
