On August 21, 2024, the CFPB took action against Fay Servicing for violations of mortgage servicing laws, as well as for violations of a 2017 agency order that addressed its illegal foreclosure practices. According to the CFPB, Fay Servicing took prohibited foreclosure actions against borrowers requesting mortgage assistance, failed to offer borrowers mortgage assistance options available to them, and overcharged for private mortgage insurance.
CFPB Director Rohit Chopra said the following in a statement:
“Fay Servicing ignored a law enforcement order by taking steps to foreclose on homeowners who are shielded by housing protection laws. The CFPB’s order will put the CEO’s pay at risk if Fay continues to break the law.”
Fay Servicing is a nonbank mortgage servicer and a wholly-owned subsidiary of Fay Financial, LLC. In 2017, the CFPB issued a consent order against Fay Servicing for failing to provide mortgage borrowers with the protections against foreclosure that are required by consumer financial protection law.
The CFPB found that the company violated the 2017 order, the Real Estate Settlement Procedures Act, the Truth in Lending Act, the Homeowners Protection Act, and the Consumer Financial Protection Act by:
Flouting a law enforcement order and violating rules that protect borrowers from prohibited foreclosure activities. The 2017 order required Fay Servicing to update its practices to protect borrowers from illegal foreclosure actions. However, the company continued to engage in prohibited foreclosures, did not promptly halt them, and failed to create written policies for compliance.
Failing to provide full information to borrowers about their loss mitigation options. When borrowers apply for loss mitigation, they indicate their preference on the application. Fay Servicing did not inform them that this preference might limit the options available for evaluation.
Overcharging for private mortgage insurance and late fees. Fay Servicing failed to stop collecting unnecessary private mortgage insurance on time, causing homeowners to overpay. They also charged late fees that were higher than permitted by the mortgage contracts.
The CFPB orders Fay Servicing to:
Pay $3 million in consumer redress for consumers against whom the company took illegal foreclosure actions and from whom Fay Servicing collected private mortgage insurance overpayments;
Limit CEO compensation if Edward Fay fails to meet the order’s requirements;
Update its servicing technology and compliance systems by investing at least $2 million; and
Pay a $2 million fine which will be deposited into the CFPB’s victims relief fund.
Read the CFPB’s press release here.
The order can be found here.
