Crackdown on Reverse Mortgage Servicers: A Victory for Aging Homeowners

Consumer Financial Protection Bureau (CFPB)

WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) has brought the hammer down on a major reverse mortgage servicing operation. This decisive action follows a concerning discovery by the CFPB that Sutherland Global, including its subsidiaries Sutherland Government Solutions and Sutherland Mortgage Services, in conjunction with NOVAD Management Consulting, had been operating in a manner detrimental to the financial well-being of elderly homeowners.

At the heart of the issue, the CFPB found that these companies were inadequately equipped to manage their servicing duties for as many as 150,000 borrowers, leading to significant operational lapses. Thousands of pleas for help from homeowners were ignored, resulting in financial hardships, such as missed opportunities to sell homes and accumulating unnecessary costs.

For their apparent indifference to their customers’ plights, these companies have been dealt a blow by the CFPB. The bureau has enforced a permanent ban on Sutherland Global, Sutherland Government Solutions, and NOVAD’s involvement in any reverse mortgage activities. This ruling also stipulates strict compliance requirements for Sutherland Mortgage Services’ future reverse mortgage initiatives.

Furthermore, these companies have been directed to pay a total of $11.5 million as compensation to the wronged customers, in addition to a civil penalty of approximately $5 million. The collected amount will flow into the CFPB’s victims relief fund.

These companies, tasked with servicing reverse mortgages on behalf of the Department of Housing and Urban Development, have been in operation from 2014 through 2022. Their primary beneficiaries were homeowners aged 62 and above seeking an income stream from their home equity.

Federal law mandates that servicers promptly address consumer inquiries about their loan. The CFPB’s investigation discovered that the companies in question egregiously violated this requirement, leaving customers without crucial information, lost in a maze of unanswered queries and unaddressed needs. This lapse led to the escalation of many problems, exacerbating financial stress on the distressed homeowners.

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“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.”

In addition to the unresponsiveness, these companies have also been charged with sending misleading repayment letters to elderly homeowners, leading them to believe that they were defaulting on their reverse mortgages.

In the wake of the CFPB’s decisive action, the spotlight now shifts to monitoring the companies’ compliance with the orders and ensuring that the promised restitution reaches the affected homeowners. This serves as a potent reminder of the role of regulatory bodies like the CFPB in protecting consumers from corporate wrongdoings and the importance of maintaining vigilant oversight in the financial domain.

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