Fay Servicing Slapped with £1.6 Million Fine for Illegal Foreclosure Practices

LONDON – The Consumer Financial Protection Bureau (CFPB) has ordered Fay Servicing to pay a £1.6 million penalty for breaching mortgage servicing laws and violating a 2017 agency order addressing illegal foreclosure practices. The company failed to implement the order's requirements and continued to operate outside the law. Fay Servicing took prohibited foreclosure actions against borrowers seeking mortgage assistance, neglected to offer available assistance options, and overcharged for private mortgage insurance.

In addition to the financial penalty, the CFPB's order mandates that Fay Servicing pay £2.4 million in consumer redress and invest £1.6 million to upgrade its servicing technology and compliance management systems. The order also imposes compensation limitations on Edward Fay, the company's Chairman of the Board and Chief Executive Officer (CEO), if he fails to take necessary steps to ensure compliance with the order.

“Fay Servicing disregarded a law enforcement order by pursuing foreclosures against homeowners protected by housing protection laws,” stated CFPB Director Rohit Chopra. “The CFPB’s order will put the CEO’s pay at risk if Fay continues to flout the law.”

Fay Servicing is a non-bank mortgage servicer based in Tampa, Florida, with branch offices in Chicago and Oakbrook Terrace, Illinois; Farmers Branch, Texas; and Lusaka, Zambia. It operates as a wholly-owned subsidiary of Fay Financial, LLC. Edward Fay serves as the founder, CEO, and Chairman of the Board for both Fay Servicing and its parent company.

Fay Servicing handles mortgage loans for borrowers across the country. Mortgage servicers are responsible for administering foreclosure relief programs to assist struggling borrowers. These programs, often referred to as loss mitigation, aid homeowners in avoiding foreclosure and can benefit both investors and homeowners by mitigating the costs associated with foreclosure. Mortgage servicers are obligated to actively engage borrowers in these programs, promptly respond to their applications, determine eligibility, and implement relief for qualifying borrowers.

In 2017, the CFPB took action against Fay Servicing for failing to provide mortgage borrowers with the legal protections against foreclosure. The CFPB found that the company withheld critical information from borrowers about the foreclosure relief application process. Additionally, the CFPB identified instances where Fay Servicing illegally initiated or progressed foreclosure proceedings while borrowers actively sought assistance to save their homes. Consequently, the CFPB ordered Fay Servicing to cease its illegal practices and pay £925,000 to affected borrowers.

The CFPB's recent action determined that Fay Servicing violated the 2017 order, the Real Estate Settlement Procedures Act, the Truth in Lending Act, the Homeowners Protection Act, and the Consumer Financial Protection Act. Fay Servicing engaged in prohibited foreclosure actions against borrowers seeking mortgage assistance, preventing them from accessing available foreclosure relief options. Specifically, Fay Servicing harmed borrowers by:

Disregarding a law enforcement order and violating rules safeguarding borrowers from prohibited foreclosure activities: The 2017 order obligated Fay Servicing to modify its practices, policies, and procedures to ensure it provided mortgage borrowers with protections against prohibited foreclosure activities. However, Fay Servicing persisted in engaging in prohibited foreclosure activities, failed to place timely holds on foreclosures, and neglected to develop written policies and procedures to guarantee compliance.

Failing to provide comprehensive information to borrowers regarding their loss mitigation options: The company's loss mitigation application requested borrowers to indicate their preferred assistance option. Fay Servicing failed to inform borrowers that their indicated preference could potentially limit the options considered by the company for their evaluation.

Overcharging for private mortgage insurance and late fees: Fay Servicing did not promptly cease collecting private mortgage insurance, resulting in homeowners overpaying for unnecessary insurance. The company also levied late fees exceeding the limits permitted by homeowners' mortgage contracts.

Enforcement Action

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against non-bank financial institutions violating consumer financial protection laws, including the Real Estate Settlement Procedures Act, the Truth in Lending Act, and the Homeowners Protection Act, and for engaging in unfair, deceptive, or abusive acts or practices. The CFPB's order requires Fay Servicing to:

Pay redress to harmed consumers: The order necessitates Fay Servicing to pay £2.4 million in consumer redress to consumers against whom the company took illegal foreclosure actions and from whom Fay Servicing collected overpayments for private mortgage insurance.

Limit CEO compensation if Edward Fay fails to meet the order’s requirements: The order imposes limitations on compensation for Edward Fay if he fails to take actions necessary to ensure compliance with the current order.

Update its servicing technology and compliance systems: Fay Servicing must invest at least £1.6 million to upgrade its servicing technology and compliance management systems.

Pay a £1.6 million fine: Fay Servicing must pay a £1.6 million penalty, which will be deposited into the CFPB's victims relief fund.

Consumers can submit complaints about financial products and services by visiting the CFPB's website or by calling (855) 411-CFPB (2372).

Employees who believe their company has violated federal consumer financial protection laws are encouraged to send information about what they know to whistleblower@cfpb.gov. To learn more about reporting potential industry misconduct, visit the CFPB's website.