At-risk homeowners trying save their homes from foreclosure during the mortgage meltdown complained for years that banks were systematically stonewalling them. On Monday, federal regulators accused a financial institution of doing just that, alleging that Michigan-based Flagstar Bank intentionally frustrated homeowners and pushed some into foreclosure.
The Consumer Financial Protection Bureau said Flagstar โfailed โฆat every step in the foreclosure relief process.โ At one point, the bank had 13,000 active loss-mitigation applications but only assigned 25 full-time employees and a third-party vendor in India to review them. In some cases, it took nine months to review applications, and the backlog of loss-mitigation applications numbered well over 1,000, the CFPB said.
The firmโs website says it has assets of $9.9 billion and is one of the nationโs top 10 largest savings banks.
โThis resolution is in the bankโs best interest,โ said Alessandro DiNello, President and Chief Executive Officer for Flagstar. โThe dedicated employees of Flagstar Bank have completed thousands of successful loan modifications and work incredibly hard to meet and exceed the needs of our customers. With this matter now behind us, everyone at Flagstar Bank is committed to building on the significant progress we have achieved while continuing to operate with integrity, responsiveness and a commitment to our core values.โ
The CFPB said Flagstar must return $27.5 million to 6,500 consumers, including 2,000 who suffered foreclosure as a result of Flagstarโs actions. The bank must also engage in active loss-mitigation efforts for current loans, including โa door knocking campaign and translation services,โ and it will pay a $10 million civil penalty.
Foreclosure relief delays saddled several efforts to ease the pain of the Great Recession, such as the Treasury Departmentโs Home Affordable Modification Program.
Other allegations in the CFPB consent order claim:
- Flagstar would close applications because of missed deadlines and stale documentation, even though โdocuments had expired because of Flagstarโs delay.โ
- The bank misled borrowers about their appeal rights. Under the CFPBโs rules, banks must provide certain borrowers the right to appeal the denial of a loan modification. But Flagstar failed to provide this notice, and it wrongly stated that borrowers have an appeal right only if they reside in certain states.
- Flagstar put borrowers in โtrial period purgatory.โ The bank needlessly prolonged trial periods for loan modifications. This caused some borrowersโ loan amount under the modified note to increase and, in some cases, jeopardized borrowersโ permanent loan modification.
More on Mortgages and Homebuying:
- Why You Should Check Your Credit Before Buying a Home
- How to Get a Loan Fully Approved
- How to Search for Your Next Home
Image: RobertCrum
You Might Also Like
September 13, 2021
Uncategorized
August 4, 2021
Uncategorized
January 28, 2021
Uncategorized