CFPB Imposes $5 Million Penalty on Fay Servicing for Illegal Foreclosure Practices

The Consumer Financial Protection Bureau (CFPB) has taken decisive action against Fay Servicing, a nonbank mortgage servicer, for continued violations of mortgage servicing laws and non-compliance with a previous enforcement order. The CFPB's latest order, issued on August 21, 2024, requires Fay Servicing to pay $5 million in redress and penalties, and imposes potential compensation limits on its CEO, Edward Fay.

The enforcement action comes seven years after a 2017 order that addressed similar illegal foreclosure practices. Despite the previous sanctions, Fay Servicing reportedly failed to implement required changes and continued to violate consumer protection laws.

Key violations cited by the CFPB include engaging in prohibited foreclosure activities against borrowers seeking mortgage assistance, failing to provide borrowers with complete information about loss mitigation options, and overcharging for private mortgage insurance and late fees. These actions directly contravened consumer protection laws and the previous 2017 order, demonstrating a pattern of non-compliance that prompted the CFPB's latest enforcement action.

CFPB Director Rohit Chopra stated, "Fay Servicing ignored a law enforcement order by taking steps to foreclose on homeowners who are shielded by housing protection laws."

The $5 million penalty breaks down as follows:

• $3 million in consumer redress
• $2 million civil money penalty

Additionally, Fay Servicing is required to invest $2 million in updating its servicing technology and compliance management systems.

In an unprecedented move, the CFPB's order includes provisions that could limit CEO Edward Fay's compensation if the company fails to meet the order's requirements. This measure aims to ensure top-level accountability for the company's compliance efforts.

Fay Servicing, headquartered in Tampa, Florida, services mortgage loans across the United States. The company's repeated violations highlight ongoing challenges in the mortgage servicing industry and the CFPB's commitment to protecting homeowners from illegal foreclosure practices.

As the housing market continues to face pressures, this enforcement action serves as a stark reminder to mortgage services of their legal obligations to struggling homeowners and the potential consequences of non-compliance.

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