Fay Servicing to pay $1.15M to settle CFPB's dual tracking claims

Fay Servicing will pay $1.15 million in borrower restitution and possible disgorgement to settle Consumer Financial Protection Bureau allegations that it engaged in so-called foreclosure dual tracking and failed to keep borrowers informed about loss mitigation efforts.

Chicago-based Fay Servicing violated Regulation X of the Real Estate Settlement Procedures Act and other consumer protection laws by taking "prohibited foreclosure actions against certain borrowers" and failing "to have policies and procedures reasonably designed to provide required foreclosure protections," the CFPB alleged in a consent order Wednesday.

Fay also failed to correctly advise borrowers of their appeal rights, and to send notifications that were timely and specified the additional documents needed from borrowers to complete loss-mitigation applications, the CFPB claims.

"The bureau found that Fay violated the CFPB's servicing rules by keeping borrowers in the dark about critical information about the process of applying for foreclosure relief," CFPB Director Richard Cordray said in a press release. "CFPB will continue to hold servicers accountable for violations of consumer protection laws."

Fay is required to pay up to $1.15 million in restitution to affected borrowers. If the actual restitution paid is less than that, the CFPB will collect the remaining balance as disgorgement.

Jordan Fisher, a Fay Servicing spokesperson, described the federal regulations of Reg X as "highly technical" in an email, and noted in a company statement that "the isolated claims concern a small fraction of the more than 85,000 borrowers whose mortgages Fay Servicing has serviced since it was founded."

"While Fay regrets any instance in which it did not comply with a regulatory requirement, we believe the affected borrowers were well-served during the loss mitigation process. The company reached this agreement with the CFPB in the interest of putting this matter behind it."

The consent order came a day after the House Financial Services Committee threatened to file contempt charges against Cordray for allegedly lying about a CFPB investigation of Wells Fargo.

The CFPB has taken enforcement actions against several mortgage-related companies recently.

These include fining Experian $3 million for deceiving consumers, alleging Ocwen Financial made widespread servicing errors, directing Equifax and TransUnion to pay more than $23 million in fines and restitution for consumer deception, and fining Nationstar $1.75 million for Home Mortgage Disclosure Act violations.