The Consumer Financial Protection Bureau (CFPB) took two separate enforcement actions against CitiFinancial Servicing and CitiMortgage, Inc., alleging that the subsidiaries of Citibank N.A. misrepresented the loan modification and loss mitigation process to borrowers struggling with their mortgage payments.
Within the consent orders, it was stated that CitiFinancial misrepresented the impact of receiving a deferment (such as additional interest accrual) and failed to treat requests for deferments as a request for a loss mitigation option, a violation of RESPA, 12 C.F.R. § 1024.41.
It was determined that CitiFinancial also failed to cancel borrowers’ optional insurance coverage in accordance with the terms of the borrowers’ promissory notes, failed to conduct reasonable investigations of direct consumer reporting disputes in violation of FCRA, inaccurately reported settled in full accounts as “charged off” to credit reporting companies, and furnished inaccurate information within 60 days of receiving notices of error regarding borrowers’ payments.
This latter finding is a violation of RESPA and Regulation X, 12 C.F.R. § 1024.35.
Specifically, the CFPB stated that since January 2014, CitiFinancial provided more than 20,000 special deferments to borrowers facing hardship. For those who received this deferment, the interest accruing during the deferment period became due immediately upon a borrower’s next scheduled payment, rather than at the end of the borrower’s loan term.
The disclosure forms sent to some borrowers stated that the “repayment term of the loan will be extended.”
“In its communications to borrowers, CitiFinancial disclosed that ‘interest will continue to accrue’ during the deferment period, but CitiFinancial did not disclose the amount of interest that would accrue during the deferment period, when the interest would be due, or how borrowers’ next payment would be applied in relation to that accrued interest,” the consent order states.
It was found that CitiFinancial also failed to disclose that a special deferment would significantly reduce the amount of principal borrowers would achieve once they resumed making loan payments, resulting in borrowers paying more interest over the life of the loan.
This created a misrepresentation that the interest would not become due immediately upon a borrower’s next scheduled payment, the CFPB determined.
As for CitiFinancial’s loss mitigation practices, the CFPB highlights in bold the language CitiFinancial’s collection notices used: “…we can explain all of the ways we can help you. For example, we may be able to customize a more convenient payment plan for you … defer late payments … or even adjust your monthly payment to a more affordable amount.”
The CFPB stated that CitiFinancial did not consider requests for deferments as applications for a loss mitigation option or “exercise reasonable diligence” in obtaining documents and information from borrowers seeking deferments necessary to complete a loss mitigation application.
“Specifically, when CitiFinancial received requests for deferments, CitiFinancial failed to, as required under Regulation X: (1) exercise reasonable diligence in obtaining documents and information necessary to complete the application; (2) acknowledge receipt of borrower’s loss mitigation applications’ and (3) identify the documents and information borrowers needed to submit to complete their loss mitigation application so they can be evaluated for all lost mitigation options,” the consent order states.
As for CitiMortgage, the CFPB stated within its consent order that the mortgage servicer informed borrowers seeking loss mitigation that they were required to submit a substantial number of documents to complete their application. Many of these documents, however, were not applicable to the borrowers’ specific financial circumstances and were not required.
In some cases, it was found that CitiMortgage requested that borrowers submit documents for their loss mitigation applications that already had been submitted.
According to the consent order, CitiMortgage would send a notice of incomplete information (NOII) letter to borrowers who filed loss mitigation applications. On the first page of these letters – in bold, all-caps – was the following language: “We must have the documents listed below to process your loss mitigation application.”
The letters then listed dozens of documents and forms that may or may not have been applicable to a borrower’s loss mitigation application. The CFPB found that these letters did not specify which of the listed documents actually were necessary for a particular borrower to submit to complete his or her application.
Near the end of the NOII letter, CitiMortgage had the following in bold text: “Remember you must provide the necessary documentation to complete your application.”
“Some affected consumers also received conflicting messages from CitiMortgage’s representatives regarding the documents that they needed to submit to complete their loss mitigation applications, including that they had to submit documents previously submitted. Affected consumers also complained about the lack of communication by CitiMortgage’s representatives, and the assignment of multiple representatives during the loss mitigation application process,” the consent order states.
As a part of the consent orders, CitiMortgage will be required to pay an estimated $17 million to compensate affected borrowers, as well as a $3 million civil penalty. CitiFinancial will be required to pay approximately $4.4 million to consumers as well as a $4.4 million civil penalty.
CitiMortgage announced Jan. 30 that it will be exiting its mortgage servicing operations by the end of 2018.
According to the announcement: “Citi has signed a definitive agreement to sell its mortgage servicing rights, and the related servicing, on approximately 780,000 Fannie Mae and Freddie Mac loans of non-Citibank retail customers with outstanding balances of approximately $97 billion to New Residential Mortgage LLC (NRZ). The sale, subject to the approval of both agencies and the FHFA, is expected to be completed in the first half of 2017.
“In addition, Citi has entered into a subservicing agreement with Cenlar FSB for the remaining Citi-owned loans and certain other mortgage servicing rights not sold to NRZ. Loan servicing on these assets are expected to be transferred to Cenlar beginning in 2018. As part of its assumption of the servicing obligations, Cenlar will provide core operations, customer service and default operations. Loans of Citi’s retail banking clients will be retained by Citi but will be included in the subservicing contract.”