CFPB consent orders against reverse mortgage servicers

On Tuesday, the CFPB ordered a reverse mortgage servicing operation to stop illegal activities that harmed older homeowners and caused them to fear losing their homes. The CFPB found that the customer service operation of Sutherland Global, its subsidiaries Sutherland Government Solutions and Sutherland Mortgage Services, and NOVAD Management Consulting had inadequate resources and staffing to handle as many as 150,000 borrowers. This caused systematic failures to respond to thousands of homeowner requests for assistance, and caused financial harm to borrowers, including losing out on home sales and paying unnecessary costs.

The orders permanently ban Sutherland Global, Sutherland Government Solutions, and NOVAD from engaging in reverse mortgage activities, imposes strict compliance requirements on future reverse mortgage activities of Sutherland Mortgage Services, requires the Sutherland companies to pay $11.5 million in redress to affected consumers, and requires all companies to pay a civil penalty of approximately $5 million, which will be deposited in the CFPB’s victims relief fund.

Sutherland and NOVAD formed a loan servicing operation to service reverse mortgages on behalf of the Department of Housing and Urban Development. The loan servicing operation existed from 2014 through 2022, and was responsible for servicing reverse mortgages for as many as 150,000 older borrowers every year.

Under federal law, a servicer must respond to consumer requests for information about their loan in a timely manner. That requirement is important to protect reverse mortgage borrowers, who remain responsible for property taxes, insurance, and other applicable fees and assessments. However, many borrowers could not get in contact with anyone at the loan servicing operation. In fact, 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 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 found that Sutherland and NOVAD violated both the Consumer Financial Protection Act and the Real Estate Settlement Procedures Act. Specifically, the companies harmed older adults with a reverse mortgage by failing to communicate with homeowners, thus preventing homeowners from being able to prove occupancy, obtain loan payoff statements, and complete alternatives to foreclosure. The CFPB also found that the companies sent false repayment letters to older adult homeowners stating that their reverse mortgage loans were due and must be paid within 30 days due to a default condition, when no such trigger event had occurred. The companies would then improperly ignore attempts by reverse mortgage borrowers to address and correct the “due and payable” letters.

• Consent order against Sutherland
• Consent order against NOVAD