CFPB Takes Action Against Sutherland Global and NOVAD Management Consulting for Reverse Mortgage Servicing Failures
CIO Applications | Thursday, July 04, 2024
Companies failed to communicate with reverse mortgage borrowers, causing older consumers to fear losing their homes
WASHINGTON - The Consumer Financial Protection Bureau (CFPB) today ordered a reverse mortgage servicing operation to stop illegal activities that harmed older homeowners and caused them to fear losing their homes. The CFPB found that the customer service operation of Sutherland Global, its subsidiaries Sutherland Government Solutions and Sutherland Mortgage Services, and NOVAD Management Consulting had inadequate resources and staffing to handle as many as 150,000 borrowers. This caused systematic failures to respond to thousands of homeowner requests for assistance, and caused financial harm to borrowers, including losing out on home sales and paying unnecessary costs. The order permanently bans Sutherland Global, Sutherland Government Solutions, and NOVAD from engaging in reverse mortgage activities, imposes strict compliance requirements on future reverse mortgage activities of Sutherland Mortgage Services, requires the Sutherland companies to pay $11.5 million in redress to affected consumers, and requires all companies to pay a civil penalty of approximately $5 million, which will be deposited in the CFPB’s victims relief fund.
“Sutherland and NOVAD were unprepared to support the hundreds of thousands of older homeowners whose reverse mortgages the defendants were responsible for,” said CFPB Director Rohit Chopra. “The defendants ignored complaints and calls for help, and they let problems snowball into disasters. Older homeowners did not choose Sutherland and NOVAD as their reverse mortgage servicer, and the CFPB is holding these defendants accountable for their unlawful neglect.”
NOVAD is a nonbank company with headquarters in Landover, Maryland. Sutherland Global is based in Pittsford, New York. Two Sutherland subsidiaries – Sutherland Mortgage Services and Sutherland Government Solutions – are also part of today’s action.
Sutherland and NOVAD formed a loan servicing operation to service reverse mortgages on behalf of the Department of Housing and Urban Development. A reverse mortgage is a special type of home loan only available to homeowners who are 62 and older seeking an income stream from their home equity. The loan servicing operation existed from 2014 through 2022, and was responsible for servicing reverse mortgages for as many as 150,000 older borrowers every year.
Under federal law, a servicer must respond to consumer requests for information about their loan in a timely manner. That requirement is important to protect reverse mortgage borrowers, who remain responsible for property taxes, insurance, and other applicable fees and assessments. However, many borrowers could not get in contact with anyone at the loan servicing operation. In fact, the companies systematically failed to respond to thousands of homeowner requests for loan payoff statements, short sales, deeds-in-lieu of foreclosures, lien releases, and requests for general information. The companies allowed problems to fester to critical points, which resulted in borrowers losing out on home sales, paying unnecessary costs, and fearing foreclosure.
The CFPB found that Sutherland and NOVAD violated both the Consumer Financial Protection Act and the Real Estate Settlement Procedures Act. Specifically, the companies harmed older adults with a reverse mortgage by:
• Hanging homeowners out to dry: The failure by the companies to communicate stopped homeowners from being able to prove occupancy, obtain loan payoff statements, and complete alternatives to foreclosure.
• Falsely telling homeowners they were in default: The companies sent false repayment letters to older adult homeowners stating that their reverse mortgage loans were due and must be paid within 30 days due to a default condition, when no such trigger event had occurred. The companies would then improperly ignore attempts by reverse mortgage borrowers to address and correct the “due and payable” letters.
WASHINGTON - The Consumer Financial Protection Bureau (CFPB) today ordered a reverse mortgage servicing operation to stop illegal activities that harmed older homeowners and caused them to fear losing their homes. The CFPB found that the customer service operation of Sutherland Global, its subsidiaries Sutherland Government Solutions and Sutherland Mortgage Services, and NOVAD Management Consulting had inadequate resources and staffing to handle as many as 150,000 borrowers. This caused systematic failures to respond to thousands of homeowner requests for assistance, and caused financial harm to borrowers, including losing out on home sales and paying unnecessary costs. The order permanently bans Sutherland Global, Sutherland Government Solutions, and NOVAD from engaging in reverse mortgage activities, imposes strict compliance requirements on future reverse mortgage activities of Sutherland Mortgage Services, requires the Sutherland companies to pay $11.5 million in redress to affected consumers, and requires all companies to pay a civil penalty of approximately $5 million, which will be deposited in the CFPB’s victims relief fund.
“Sutherland and NOVAD were unprepared to support the hundreds of thousands of older homeowners whose reverse mortgages the defendants were responsible for,” said CFPB Director Rohit Chopra. “The defendants ignored complaints and calls for help, and they let problems snowball into disasters. Older homeowners did not choose Sutherland and NOVAD as their reverse mortgage servicer, and the CFPB is holding these defendants accountable for their unlawful neglect.”
NOVAD is a nonbank company with headquarters in Landover, Maryland. Sutherland Global is based in Pittsford, New York. Two Sutherland subsidiaries – Sutherland Mortgage Services and Sutherland Government Solutions – are also part of today’s action.
Sutherland and NOVAD formed a loan servicing operation to service reverse mortgages on behalf of the Department of Housing and Urban Development. A reverse mortgage is a special type of home loan only available to homeowners who are 62 and older seeking an income stream from their home equity. The loan servicing operation existed from 2014 through 2022, and was responsible for servicing reverse mortgages for as many as 150,000 older borrowers every year.
Under federal law, a servicer must respond to consumer requests for information about their loan in a timely manner. That requirement is important to protect reverse mortgage borrowers, who remain responsible for property taxes, insurance, and other applicable fees and assessments. However, many borrowers could not get in contact with anyone at the loan servicing operation. In fact, the companies systematically failed to respond to thousands of homeowner requests for loan payoff statements, short sales, deeds-in-lieu of foreclosures, lien releases, and requests for general information. The companies allowed problems to fester to critical points, which resulted in borrowers losing out on home sales, paying unnecessary costs, and fearing foreclosure.
The CFPB found that Sutherland and NOVAD violated both the Consumer Financial Protection Act and the Real Estate Settlement Procedures Act. Specifically, the companies harmed older adults with a reverse mortgage by:
• Hanging homeowners out to dry: The failure by the companies to communicate stopped homeowners from being able to prove occupancy, obtain loan payoff statements, and complete alternatives to foreclosure.
• Falsely telling homeowners they were in default: The companies sent false repayment letters to older adult homeowners stating that their reverse mortgage loans were due and must be paid within 30 days due to a default condition, when no such trigger event had occurred. The companies would then improperly ignore attempts by reverse mortgage borrowers to address and correct the “due and payable” letters.
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