Two nonbanks banned for putting senior homeowners at risk of foreclosure
The Consumer Financial Protection Bureau (CFPB) has permanently banned nonbanks Sutherland Global and its subsidiary, Sutherland Government Solutions, from reverse mortgage servicing.
This decision comes after the CFPB found that the companies failed to communicate effectively with reverse mortgage borrowers, causing many older consumers to fear losing their homes.
“Sutherland and NOVAD were unprepared to support the hundreds of thousands of older homeowners whose reverse mortgages the defendants were responsible for,” said CFPB director Rohit Chopra. “The defendants ignored complaints and calls for help, and they let problems snowball into disasters.”
The CFPB’s investigation revealed that Sutherland Global, along with its subsidiaries Sutherland Government Solutions and Sutherland Mortgage Services, and NOVAD Management Consulting, had insufficient resources and staffing to manage up to 150,000 borrowers.
Despite federal requirements for servicers to respond to consumer requests promptly, many borrowers could not contact the loan servicing operation. The companies systematically failed to respond to thousands of homeowner requests for critical information, causing significant financial and emotional distress.
This led to systematic failures in responding to homeowner requests for assistance, which resulted in borrowers losing out on home sales, incurring unnecessary costs, and fearing foreclosure, it said.
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CFPB said the companies failed to communicate effectively with homeowners, stopping them from obtaining important information such as loan payoff statements and alternatives to foreclosure. The companies also falsely told homeowners they were in default, leading to further confusion and distress.
“Older homeowners did not choose Sutherland and NOVAD as their reverse mortgage servicer, and the CFPB is holding these defendants accountable for their unlawful neglect,” Chopra said.
The regulator has permanently banned the companies from engaging in reverse mortgage servicing activities.
Additionally, the order imposes strict compliance requirements on future reverse mortgage activities by Sutherland Mortgage Services. The companies must pay $11.5 million in redress to affected consumers and a civil penalty of approximately $5 million.
The civil penalties will be deposited into the CFPB’s victims relief fund. Due to NOVAD’s declared inability to pay, it is required to pay $1 to the fund, potentially making consumers eligible for additional relief in the future.
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