Millions of consumers lost their homes when the housing market bubble burst. But federal regulators say some of those people may have been able to stay in their homes had mortgage lenders fulfilled their requirements. To that end, the Consumer Financial Protection Bureau has ordered two Citigroup subsidiaries to pay $28.8 million to resolve allegations that some of its mortgage units harmed home borrowers.
The CFPB announced Monday that CitiMortgage [PDF] and CitiFinancial Services [PDF] will pay fines and restitution to thousands of customers who were allegedly not made aware of their options to avoid foreclosure.
In all, CitiMortgage must pay $17 million to consumers and pay a civil penalty of $3 million, while CitiFinancial Services must refund approximately $4.4 million to consumers and pay a civil penalty of $4.4 million.
According to the CFPB complaint, the subsidiaries gave customers struggling to make mortgage payments the runaround when it came to trying to save their homes.
For example, CitiFinancial Servicing — which collects payments from borrowers for loans it originates and handles customer service, collections, loan modifications, and foreclosures — failed to consider a borrower’s application for deferred payment as a request for foreclosure relief options, the CFPB alleges.
Requests for foreclosure relief trigger protections required by CFPB mortgage servicing rules, that include helping borrowers complete their applications and considering them for all available foreclosure relief alternatives.
In the case that CitiFinancial did allow customers to defer payments, the CFPB claims, the subsidiary did not provide borrowers with information on how that would affect their future payment. Specifically, the company did not notify borrowers that the deferred amounts would become due when the deferment ended.
Additionally, the CFPB alleges that CitiFinancial charges customers for credit insurance — which cover a home loan if the borrower couldn’t make a payment — despite the fact that the insurance should have been canceled.
From July 2011 to April 30, 2015, the CFPB claims that 7,800 borrowers paid for credit insurance that CitiFinancial Servicing should have canceled based on the terms that insurance would not be applicable if the borrower had missed four or more monthly payments.
As for CitiMortgage, the CFPB complaint alleges that the subsidiary failed to help consumers looking for assistance in making their mortgage payments.
Instead, the Bureau alleges that when customers asked for help, CitiMortgage requested borrowers provide dozens of documents and forms that had no bearing on the application for foreclosure relief or that the consumer had already provided.
In 2014 alone, the CFPB claims that CitiMortgage sent 41,000 borrowers letters requesting unneeded documents with descriptions such as “teacher contract,” and “Social Security award letter.”
In addition to paying fines and refunds, CitiFinancial and CitiMortgage must clearly provide customers with information on what documents are needed for foreclosure relief, and provide terms for deferments upfront.
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