Residential Credit Solutions Fined $1.5 Million for Illegal Mortgage Servicing

Apparently the Consumer Financial Protection Bureau is doing more than pointing out Compliance Violation Trends as we reported last month, and is now taking action to enforce their new mortgage servicing rules.  The Consumer Financial Protection Bureau is fining Residential Credit Solutions $1.5 million for illegal mortgage servicing practices.

According to a release from the CFPB, Residential Credit Solutions failed to honor modifications for loans transferred from other servicers, treated consumers as if they were in default when they weren’t, sent consumers escrow statements falsely claiming they were due a refund, and forced consumers to waive their rights in order to get a repayment plan.

Residential Credit Solutions, a Ft. Worth, Texas-based mortgage servicing company, specializes in servicing delinquent or default loans and so-called “credit-sensitive” residential mortgage loans, where the borrower is at high risk for default.

According to the CFPB, Residential Credit Solutions has about $95 million in total assets.

Since 2009, approximately 75,000 borrowers have had their loans transferred to Residential Credit Solutions.

According to the CFPB, Residential Credit Solutions engaged in illegal practices when servicing loans that it acquired from other servicers.

The CFPB order stated that the company, on a number of occasions, failed to honor trial loan modifications that consumers had entered into with their prior servicers.

Instead of honoring those previous agreements, Residential Credit Solutions allegedly insisted that the consumer re-prove that he or she was qualified.

According to the CFPB, by refusing to honor previously agreed upon loan modifications, Residential Credit Solutions effectively set consumers back as though they had not received a trial modification.

It also prolonged many people’s loss mitigation plans, the CFPB said.

“The company put consumers in loan modification trial period purgatory and confused consumers about the status of their modifications, making it difficult for them to take appropriate action,” the CFPB said in a release. “In many cases, the company delayed or deprived borrowers of the opportunity to save or sell their homes.”

The CFPB also said that Residential Credit Solutions’ “failures as a mortgage servicer” caused harm to homeowners.

“In many cases, the company deprived borrowers of the ability to make an informed choice about how to save or sell their home, caused borrowers to drop out from the loss mitigation process entirely, and drove borrowers into foreclosure,” the CFPB said.

According to the CFPB, Residential Credit Solutions violated the Consumer Financial Protection Act in five ways since January 2009.

As part of the CFPB’s punishment, Residential Credit Solutions is ordered must pay $1.5 million to the hundreds of consumers whose in-process loan modifications were not honored. Borrowers who receive payments will not be prevented from taking individual action on their claims as a result of this settlement, the CFPB said.

What do you think about this action by the CFPB?  We’d love to hear from you.

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