Citi Servicing Companies Fined For Giving Struggling Borrowers ‘The Runaround’

Posted by Patrick Barnard on January 23, 2017 No Comments

The Consumer Financial Protection Bureau (CFPB) is fining Citibank subsidiaries CitiFinancial Servicing and CitiMortgage Inc. for “giving the runaround to struggling homeowners seeking options to save their homes.”

The bureau alleges that the mortgage servicing companies “kept borrowers in the dark about options to avoid foreclosure or burdened them with excessive paperwork demands in applying for foreclosure relief.”

As a result, the CFPB is fining CitiMortgage $3 million and is requiring the servicer to pay about $17 million in compensation to wronged consumers. In addition, it is requiring CitiFinancial Services to pay a $4.4 million fine and to refund approximately $4.4 million to consumers.

“Citi’s subsidiaries gave the runaround to borrowers who were already struggling with their mortgage payments and trying to save their homes,” says Richard Cordray, director of the CFPB, in a release. “Consumers were kept in the dark about their options or burdened with excessive paperwork. This action will put money back in consumers’ pockets and make sure borrowers can get help they need.”

The CFPB says when struggling borrowers who contacted CitiFinancial Servicing requesting assistance were offered deferments, however, the firm failed to offer them foreclosure relief options, as required under the CFPB’s mortgage servicing rules.

By omitting this information, the servicer kept “consumers in the dark about foreclosure relief options,” the CFPB says.

“When borrowers applied to have their payments deferred, CitiFinancial Servicing failed to consider it as a request for foreclosure relief options,” the bureau says in a release. “As a result, borrowers may have missed out on options that may have been more appropriate for them. Such requests for foreclosure relief trigger protections required by CFPB mortgage servicing rules. The rules include helping borrowers complete their applications and considering them for all available foreclosure relief alternatives.”

CitiFinancial Servicing is also accused of misleading consumers about the impact of deferring payment due dates. Specifically, the bureau says CitiFinancial Servicing “misled borrowers into thinking that if they deferred the payment, the additional interest would be added to the end of the loan rather than become due when the deferment ended.”

“In fact, the deferred interest became due immediately,” the bureau says in its release. “As a result, more of the borrowers’ payment went to pay interest on the loan instead of principal when they resumed making payments. This made it harder for borrowers to pay down their loan principal.”

CitiFinancial Servicing is also accused of charging consumers for credit insurance that should have been canceled or prematurely canceling that credit insurance for some borrowers.

In addition, the CFPB says the firm sent inaccurate consumer information to credit reporting companies – specifically, it is accused of incorrectly reporting some settled accounts as being charged off.

CitiFinancial Servicing is further accused of failing to investigate consumer disputes about incorrect information sent to credit reporting companies within the required time period. “In some instances, the servicer ignored a ‘notice of error’ sent by consumers, which should have stopped the servicer from sending negative information to credit reporting companies for 60 days,” the CFPB says.

CitiMortgage is accused of requiring borrowers who had asked for assistance to send “dozens of documents and forms that had no bearing on the application or that the consumer had already provided,” the bureau says.

“Many of these documents had nothing to do with a borrower’s financial circumstances and were actually not needed to complete the application,” the bureau says. “Letters sent to borrowers in 2014 requested documents with descriptions such as ‘teacher contract’ and ‘Social Security award letter.’ CitiMortgage sent such letters to about 41,000 consumers.”

As a result, CitiMortgage violated the Real Estate Settlement Procedures Act, as well as the Dodd-Frank Act’s prohibition against deceptive acts or practices, the CFPB says.

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