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At-risk homeowners trying save their homes from foreclosure during the mortgage meltdown complained for years that banks were systematically stonewalling them. On Monday, federal regulators accused a financial institution of doing just that, alleging that Michigan-based Flagstar Bank intentionally frustrated homeowners and pushed some into foreclosure.
The Consumer Financial Protection Bureau said Flagstar “failed …at every step in the foreclosure relief process.” At one point, the bank had 13,000 active loss-mitigation applications but only assigned 25 full-time employees and a third-party vendor in India to review them. In some cases, it took nine months to review applications, and the backlog of loss-mitigation applications numbered well over 1,000, the CFPB said.
The firm’s website says it has assets of $9.9 billion and is one of the nation’s top 10 largest savings banks.
“This resolution is in the bank’s best interest,” said Alessandro DiNello, President and Chief Executive Officer for Flagstar. “The dedicated employees of Flagstar Bank have completed thousands of successful loan modifications and work incredibly hard to meet and exceed the needs of our customers. With this matter now behind us, everyone at Flagstar Bank is committed to building on the significant progress we have achieved while continuing to operate with integrity, responsiveness and a commitment to our core values.”
The CFPB said Flagstar must return $27.5 million to 6,500 consumers, including 2,000 who suffered foreclosure as a result of Flagstar’s actions. The bank must also engage in active loss-mitigation efforts for current loans, including “a door knocking campaign and translation services,” and it will pay a $10 million civil penalty.
Foreclosure relief delays saddled several efforts to ease the pain of the Great Recession, such as the Treasury Department’s Home Affordable Modification Program.
Other allegations in the CFPB consent order claim:
Image: RobertCrum
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