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CFPB Penalizes Texas-Based Servicer for Blocking Borrowers’ Efforts to Stop Foreclosure

The Consumer Financial Protection Bureau (CFPB) on Thursday announced a consent order against Fort Worth, Texas-based mortgage servicer Residential Credit Solutions for allegedly blocking borrowers' efforts to prevent foreclosure on their homes.

The CFPB ordered Residential Credit Solutions to pay $1.5 million in redress to consumers and fined the servicer an additional $100,000 civil penalty. The Bureau said an investigation revealed that Residential failed to honor loan modifications transferred from other servicers, treated consumers as if they were in default when in fact they were not, falsely claimed consumers had extra money in escrow and were due a refund, and forced consumers to waive their rights to obtain a repayment plan.

"By failing to honor loan modifications already in place, Residential Credit Solutions put consumers through more headaches but in some cases cost consumers their homes," CFPB Director Richard Cordray said. "Residential Credit Solutions must now compensate its victims $1.5 million as a result of our action."

According to the consent order, Residential Credit Solutions failed to honor trial loan modifications borrowers had entered into previously with other servicers starting in 2009. Residential instead insisted that consumers re-prove they qualified for loan modifications, effectively prolonging consumers' loss mitigation plans by setting the consumers back as if they had not received a modification. CFPB said the company put consumers in "loan modification purgatory," confusing them about the status of their loan mods and making it difficult to take appropriate action. In many cases, CFPB said, this confusion over the loan modification status delayed or deprived borrowers of the opportunity to sell their home or save it from foreclosure.

CFPB said the actions of Residential Credit Solutions hurt many homeowners by depriving them of the ability to make an informed decision about selling or saving their home, drove borrowers out of the loss mitigation process completely, or drove them into foreclosure. These actions, CFPB said, were in violation of the Consumer Protection Act.

A message left by DS News with Residential Credit Solutions seeking comment was not immediately returned.

Residential Credit Solutions services mortgages nationwide and has approximately $95 million in total assets. According to CFPB, about 75,000 borrowers have transferred their mortgage loans to Residential since 2009. Residential specializes in servicing delinquent loans and loans on which the borrower is at high risk of default. The company also provides foreclosure alternatives such as short sales and other foreclosure relief programs, to distressed borrowers.

To view a copy of the CFPB's consent order against Residential Credit Solutions, click here.

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