The consumer Financial Protection Bureau (CFPB) on Wednesday said it imposed $7 million in penalties, plus other forms of redress on Fay Servicing after saying the company violated mortgage servicing laws and violated an order from 2017 that addressed its illegal foreclosure practices.
To further rectify the situation, Fay Servicing CEO Edward Fay could see limits to his compensation if he fails to take action to comply with Wednesday's order, the CFPB said.
At the same time a company spokesperson for Fay Servicing pushed back on the CFPB's statement, saying that it had cooperated with the CFPB for a decade and had been transparent with the bureau throughout the investigation.
In Wednesday's announcement the bureau said Tampa, Fla.-based Fay Servicing took foreclosure measures against homeowners, that it had been barred from doing, when they had requested mortgage assistance instead. Also, they failed to offer options that were open to borrowers, and they overcharged for private mortgage insurance.
The bureau imposed a $2 million penalty for violating the servicing laws, but the order included other disciplinary actions. Fay Servicing must pay consumers $3 million in redress and make a $2 million capital investment updating its servicing technology and compliance management systems.
"Fay continues to strongly disagree with the CFPB's claims in this matter, but we made a business decision to settle … this case so that we can focus our time and efforts on supporting borrowers," according to a company spokesperson. "We are proud of our record and our team's commitment to borrowers. While we disagree with the CFPB's positions, we are pleased to put this matter behind us."
"Fay Servicing ignored a law enforcement order by taking steps to foreclose on homeowners who are shielded by housing protection laws," according to a statement from CFPB Director Rohit Chopra. "The CFPB order will put the CEO's pay at risk if Fay continues to break the law."
The servicer took issue with mention of the CEO as well, referring to it as an agenda-driven tactic to include company CEOs in such enforcements. The move also appears to disproportionately affect smaller companies, according to a Fay Servicing spokesperson.
In the 2017 order, the CFPB said the company failed to provide its customers with foreclosure protections which they were entitled to receive by law. By concealing critical information about the foreclosure relief process, the CFPB said in a statement at the time.
When it announced the 2017 enforcement action, the CFPB ordered Fay Servicing to end its illegal practices, and it told the company to pay $1.1 million to borrowers who were harmed.
