The Consumer Financial Protection Bureau issued consent orders against a pair of companies Tuesday, citing what it called harmful delays in their work
The order seeks to permanently bar two Sutherland Global subsidies and Novad Management Consulting from reverse mortgage services and called upon them to pay millions of dollars in redress and a civil monetary penalty.
Sutherland was a subcontractor for Novad, and the two were responsible for servicing Home Equity Conversion Mortgages between 2014 and 2022. HECMs are Federal Housing Administration-insured products available to borrowers 62 and older.
"Sutherland and Novad were unprepared to support the hundreds of thousands of older homeowners whose reverse mortgages the defendants were responsible for,"
"The defendants ignored complaints and calls for help, and they let problems snowball into disasters," he added. CFPB alleged around 150,000
The companies "systematically failed to respond to thousands of homeowner requests for loan payoff statements, short sales, deeds-in-lieu of foreclosures, lien releases and requests for general information," the bureau further alleged.
"The companies allowed problems to fester to critical points, which resulted in borrowers losing out on home sales, paying unnecessary costs, and fearing foreclosure," the CFPB stated.
In doing this, the companies allegedly violated the Real Estate Settlement Procedures Act and also engaged in unfair, deceptive or abusive acts and practices, such as falsely telling borrowers they were in default or not offering options, according to the CPPB.
The bureau specifically named two units of Sutherland respectively handling government solutions and mortgage services in its complaint. They have been ordered to pay $11.5 million in redress to customers for their actions.
The CFPB also is ordering both those entities and Novad to collectively pay a roughly $5 million
The bureau is asking for $1 million from Novad due to its declaration of an inability to pay.
At one point Novad was the official Department of Housing and Urban Development subservicer, but
Sutherland said in a press release Tuesday that it had "reached a voluntary agreement" with the bureau regarding work as a subcontractor for Novad in its HUD work, performing "specified limited support services" for reverse and other mortgages.
The company said it "was not directly responsible for the reverse mortgage servicing conduct that is the subject of the CFPB agreement. HUD controlled all aspects of the reverse mortgage servicing and communicated only with Novad."
"Sutherland had no direct access to HUD guidelines, the HUD servicing system, borrower communications, or the borrower files," it added. "Sutherland therefore disagrees with the CFPB findings and denies the CFPB's allegations."
The company said it agreed to the order and to absorb the bulk of payments because it wanted to focus on current customers, not a past issue. Both a review of Novad financials and a key executive's tax statement showed an inability to pay, it added.
Novad had not responded to inquiries from this publication at the time of this writing.
The CPFB has warned servicers that it won't tolerate what it has called excessive or
"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.
Reverse mortgage servicing is a specialized process, and a relatively limited number of companies are active in the space.
Novad is a Landover, Maryland-based nonbank company and Sutherland Global is a digital services provider with headquarters in Pittsford, New York.
