Reverse servicing failures, repeated data errors, earn mortgage-related companies combined nearly $9 million in penalties

Two mortgage-related firms face action – including a combined nearly $9 million in penalties — for reverse mortgage servicing failures and recurring data errors, the federal consumer financial protection agency charged Tuesday.

The Consumer Financial Protection Bureau (CFPB) said Freedom Mortgage Corp. of Boca Raton, Fla., and Sutherland Global and NOVAD Management Consulting — of Pittsford, N.Y. for the former, and of Landover, Md., for the latter – were charged in separate actions.

In the action filed in federal court, the bureau called Freedom Mortgage, a nonbank mortgage company, a “repeat offender” for submitting error-riddled mortgage loan data to federal regulators. The agency said the firm violated both the Home Mortgage Disclosure Act (HMDA) and a 2019 CFPB order. That order – issued after the firm was found to have submitted mortgage data from 2014-17 that contained errors – resulted in a civil money penalty (CMP) of $1.75 million and the firm agreeing to take steps to improve its compliance management to prevent future violations.

The bureau charged that Freedom’s HMDA data submission for 2020 contained “widespread errors across numerous data fields because of systemic problems with its compliance management systems.” The bureau noted that the firm’s HMDA violations occurred while it was subject to the 2019 law enforcement order.

In addition to a $3.95 million fine, CFPB has also asked the court to impose injunctive relief designed to prevent future violations of the law by requiring Freedom to regularly audit, test, and correct the company’s HMDA data.

Meanwhile, in the other action, the bureau said Sutherland Global and NOVAD Management Consulting “failed to communicate with reverse mortgage borrowers, causing older homeowners to fear losing their homes.” The agency ordered the firms to stop.

More specifically, the agency said the firms violated both the Consumer Financial Protection Act (CFPA) and the Real Estate Settlement Procedures Act (RESPA) and harmed older adults with a reverse mortgage by:

  • Hanging homeowners out to dry by failing to communicate, which stopped homeowners from being able to prove occupancy, obtain loan payoff statements, and complete alternatives to foreclosure.
  • Falsely telling homeowners they were in default through phony 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, the bureau said.

CFPB said its consent order with the firms would permanently ban Sutherland Global, Sutherland Government Solutions, and NOVAD from engaging in reverse mortgage activities. It also imposes strict compliance requirements on future reverse mortgage activities of Sutherland Mortgage Services and requires the Sutherland companies to pay $11.5 million in redress to affected consumers, and requires all companies to pay a CMP of approximately $5 million.

CFPB Takes Action Against Repeat Offender Freedom Mortgage Corporation for Violating Law Enforcement Order and for Housing Data Errors

CFPB Takes Action Against Sutherland Global and NOVAD Management Consulting for Reverse Mortgage Servicing Failures