Seterus, a now defunct mortgage company owned by IBM, has agreed to pay reimbursements and fines of over $ 5 million in a settlement with the Consumer Financial Protection Bureau. Seterus did not admit or deny any of the allegations.
The CFPB had accused the company of delaying or depriving some of the borrowers of a reasonable opportunity to complete their mitigation requests. Seterus was also accused of failing to protect some borrowers from prohibited foreclosure measures.
These were violations of Regulation X of the Real Estate Settlement Procedures Act as well as the Consumer Financial Protection Act of 2010.
"The Seterus third party vendor made numerous mistakes in branding, encoding and extracting data from borrower documents, and Seterus used this inaccurate data to fill in these fields in the confirmation message," the settlement agreement states. "Also, the coding Seterus relied on to ensure that its internal systems were communicating properly with each other and with the third-party system was not always correct, which led to more such errors."
When Seterus became aware of the incorrect communications in 2014, it issued corrected communications, but they contained the same incorrect information that was in the original, the CFPB found.
During this period, Seterus reportedly sent numerous confirmation messages failing to inform affected borrowers of the additional documents and information they were required to provide to complete their mitigation applications. The notices also did not include an appropriate due date for filing documents.
Some borrowers have been unfairly excluded, CFPB said, while others have suffered violations such as negative credit reports, additional late fees and additional interest payments.
The company entered into a settlement with New Hampshire regulators in September 2014 and notified CFPB of the issues in 2015. However, erroneous reports continued to be issued until 2018, albeit less frequently.
CFPB found that Seterus was trying to mitigate the damage for some borrowers by offering optimized loan modifications.
Kyanite Services, the successor to Seterus, has to pay 11,866 consumers $ 4.9 million, split into three groups based on whether they were excluded or not.
In addition, Kyanite has to pay a fine of $ 500,000. The agreement also provides for an injunction in the event that Kyanite re-enters the mortgage servicing business.
Mr. Cooper acquired Seterus' $ 24 billion service portfolio in February 2019, with another $ 24 billion undersupplied.
In an unrelated case, Mr. Cooper recently entered into separate agreements with the CFPB and state regulators, as well as the Department of Justice, on the treatment of distressed mortgage borrowers. Cooper has confirmed that problems occurred in the Seterus case prior to acquiring the portfolio and that Mr. Cooper has no financial responsibility for this arrangement.
During the financial crisis, Seterus had been one of several non-banks to purchase MSR packages, a large part of which contained bad loans.