UNITED STATES OF AMERICA CONSUMER FINANCIAL PROTECTION BUREAU

2017-CFPB-0014 Document 1 Filed 06/07/2017 Page 1 of 51

U N ITED STATES OF AMERICA CON SU MER FIN AN CIAL PROTECTION BU REAU

ADMINISTRATIVE PROCEEDING File No. 20 17-CFPB-0 0 14

In the Matter of:

CONSENT ORDER

FAY SERVICING, LLC

The Consum er Financial Protection Bureau (Bureau) has reviewed the m ortgage servicing practices of Fay Servicing, LLC (Respondent, as defined below), specifically related to its handling of loss-mitigation applications and its implementation of foreclosure protections required to be afforded to borrowers engaged in the lossm itigation process, and has identified the following law violations. Respondent violated the Real Estate Settlem ent Procedures Act (RESPA), 12 U.S.C. 260 1, et seq., its im plem enting regulation, Regulation X, 12 C.F.R. part 10 24, and the Consum er Financial Protection Act of 20 10 (CFPA) as follows: Respondent took prohibited foreclosure actions against certain borrowers, in violation of 12 C.F.R. ? 10 24.41(f)(2) and (g); Respondent failed to have policies and procedures reasonably designed to provide required foreclosure protections in com pliance with applicable law, in violation of 12 C.F.R. ? 10 24.38(a) and (b)(1)(v); Respondent failed to send or tim ely send acknowledgm ent notices to num erous borrowers, in violation of 12 C.F.R. ? 10 24.41(b)(2)(i)(B); Respondent failed to state in the acknowledgm ent notices the additional docum ents and inform ation needed from borrowers to m ake their loss-

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m itigation applications com plete, in violation of 12 C.F.R. ? 10 24.41(b)(2)(i)(B); Respondent failed to have policies and procedures reasonably designed to facilitate com pliance with the acknowledgm ent notice requirement under 12 C.F.R. ? 10 24.41(b)(2)(i)(B), in violation of 12 C.F.R. ? 10 24.38(a) and (b)(2)(iv); Respondent failed to send or tim ely send evaluation notices to num erous borrowers, in violation of 12 C.F.R. ? 10 24.41(c)(1); Respondent failed to correctly advise num erous borrowers of their appeal rights in evaluation notices, in violation of 12 C.F.R. ? 10 24.41(c)(1); and Respondent failed to have policies and procedures reasonably designed to properly evaluate borrowers for loss-m itigation options in accordance with 12 C.F.R. ? 10 24.41, in violation of 12 C.F.R. ? 10 24.38(a) and (b)(2)(v). Under Sections 10 53 and 10 55 of the CFPA, 12 U.S.C. ?? 5563, 5565, the Bureau issues this Consent Order (Consent Order).

I Ove rvie w

1. When the financial crisis erupted m any m ortgage servicers were ill-equipped to handle the high volum es of delinquent m ortgages and loan m odification requests they were required to process. There were pervasive problem s with servicers' ability to process borrowers' applications for relief related to their m ortgages, a process generally known as loss-m itigation. Servicers' problem atic practices in loss-m itigation included lost docum ents, non-responsiveness, and unwillingness to work with borrowers to reach agreements on options that would allow borrowers to avoid foreclosures. In response, the Bureau published rules, which becam e effective on J anuary 10 , 20 14, that, am ong other things, serve as national m ortgage servicing standards (the Mortgage Servicing Rules). Am ong the borrower protections provided by the Mortgage Servicing Rules is a full and fair 2

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opportunity to be evaluated for options that allow borrowers to avoid the harm s associated with foreclosures. 2. Am ong other things, the Mortgage Servicing Rules require m ortgage servicers that offer loss-m itigation options to im plem ent loss-m itigation processes that (i) respond tim ely to borrowers, (ii) inform borrowers of the docum ents and inform ation they m ust provide to be evaluated for alternatives to foreclosure, (iii) inform borrowers of the results of the evaluation of their applications, and (iv) provide foreclosure protections to borrowers who reach certain points in the lossm itigation process. Respondent's loss-m itigation processes failed to provide certain borrowers with these rights and protections to which they were entitled.

II Ju ris d ictio n 3. The Bureau has jurisdiction over this m atter under sections 10 53 and 10 55 of the CFPA, 12 U.S.C. ?? 5563 and 5565, the Real Estate Settlem ent Procedures Act (RESPA), 12 U.S.C. 260 1, et seq., and its im plem enting regulation, Regulation X, 12 C.F.R. part 10 24.

III Stip u latio n 4. Respondent has executed a "Stipulation and Consent to the Issuance of a Consent Order," dated J une 5, 20 17 (Stipulation), which is incorporated by reference and is accepted by the Bureau. By this Stipulation, Respondent has consented to the issuance of this Consent Order by the Bureau under sections 10 53 and 10 55 of the CFPA, 12 U.S.C. ?? 5563 and 5565, without adm itting or denying any of the

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findings of fact or conclusion of law, except that Respondent adm its the facts necessary to establish the Bureau's jurisdiction over Respondent and the subject matter of this action.

IV D e fin itio n s 5. The following definitions apply to this Consent Order: a. "Acknowledgm ent Notice" m eans, as required by 12 C.F.R. ? 10 24.41(b)(2)(i)(B), the written notice servicers m ust send to a borrower within 5 days (excluding legal public holidays, Saturdays, and Sundays) after receiving a Loss-Mitigation Application 45 days or m ore before a foreclosure sale. The notice indicates the servicer acknowledges receipt of the LossMitigation Application and states that the servicer has determ ined that the Loss-Mitigation Application is either com plete or incomplete. If a LossMitigation Application is incom plete, the notice m ust state the additional docum ents and inform ation the borrower m ust subm it to m ake the LossMitigation Application com plete and the applicable date pursuant to 12 C.F.R. ?10 24.41(b)(2)(ii). b. "Affected Consum er" m eans a borrower who was subjected to any of the following actions, as defined below: Foreclosure Violation, Untim ely Evaluation Notice, No Evaluation Notice, Untim ely Acknowledgm ent Notice, or No Acknowledgm ent Notice. c. "Board" m eans the duly-elected and acting Board of Directors of Fay Financial LLC. d. "Effective Date" m eans the date on which the Consent Order is issued.

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e. "Evaluation Notice" m eans, as required by 12 C.F.R. ? 10 24.41(c)(1)(ii), the written notice servicers m ust send to a borrower within 30 days of receiving a com plete Loss-Mitigation Application if the com plete Loss-Mitigation Application was received m ore than 37 days before a foreclosure sale. The notice states the servicer's determ ination of which Loss-Mitigation Options, if any, it will offer to the borrower on behalf of the owner or assignee of the m or t ga ge.

f. "First Filing" m eans, as set forth in 12 C.F.R. ? 10 24.41, the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process.

g. "Foreclosure Violation" m eans an instance in which Respondent took one of the following actions in violation of 12 C.F.R. ? 10 24.41 against a borrower entitled to foreclosure protections under 12 C.F.R. ? 10 24.41: i. making a First Filing; ii. Moving for J udgm ent; or iii. conducting a foreclosure sale.

h. "Loss-Mitigation Application" means, as set forth in 12 C.F.R. ? 10 24.31, an oral or written request for a Loss-Mitigation Option that is accom panied by any inform ation required by a servicer for evaluation for a Loss-Mitigation Op t ion .

i. "Loss-Mitigation Option" m eans, as set forth in 12 C.F.R. ? 10 24.31, an alternative to foreclosure offered by the owner or assignee of a m ortgage loan that is m ade available through the servicer to the borrower.

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