Citi subsidiaries must pay $28.8 million for giving ‘runaround’ to borrowers

by Ryan Smith24 Jan 2017
The Consumer Financial Protection Bureau has taken separate actions against CitiFinancial and CitiMortgage for allegedly giving borrowers trying to save their homes “the runaround.” The agency has slapped the servicers with a total of $28.8 million in fines.

According to the CFPB, CitiFinancial and CitiMortgage “kept borrowers in the dark” about their options to avoid foreclosure – or hit them with “excessive paperwork” when they applied for foreclosure relief.

“Citi’s subsidiaries gave the runaround to borrowers who were already struggling with their mortgage payments and trying to save their homes,” said CFPB Director Richard Cordray. “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 Consumer Financial Protection Bureau (CFPB) today took separate actions against CitiFinancial Servicing and CitiMortgage, Inc. for giving the runaround to struggling homeowners seeking options to save their homes. The mortgage servicers kept borrowers in the dark about options to avoid foreclosure or burdened them with excessive paperwork demands in applying for foreclosure relief. The CFPB is requiring CitiMortgage to pay an estimated $17 million to compensate wronged consumers, and pay a civil penalty of $3 million; and requiring CitiFinancial Services to refund approximately $4.4 million to consumers, and pay a civil penalty of $4.4 million.

“Citi’s subsidiaries gave the runaround to borrowers who were already struggling with their mortgage payments and trying to save their homes,” said CFPB Director Richard Cordray. “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.”

According to the CFPB, CitiFinancial:
  • Didn’t let borrowers know about foreclosure relief options. When borrowers applied to have their payments deferred, CitiFinancial failed to consider it a request for foreclosure relief options. That meant borrowers missed out on options that may have worked better for them, according to the CFPB.
  • Misled borrowers about the impact of deferring payment due dates. According to the CFPB, CitiFinancial misled borrowers into thinking that if they deferred payment, the additional interest would be added at the end of the loan rather than coming due when the deferment ended. In reality, the deferred interest was due immediately upon the end of the deferment, meaning more of the borrowers’ payment went to pay down interest rather than principal.
  • Charged borrowers from credit insurance that should have been canceled. Credit insurance, which is paid as part of borrowers’ monthly mortgage payment, is meant to cover the loan if a borrower can’t make the payments. CitiFinancial was supposed to cancel the insurance if a borrower missed four or more monthly payments. But between 2011 and 2015, according to the CFPB, thousands of borrowers paid for credit insurance that CitiFinancial should have canceled. Those payments were directed toward insurance premiums rather than loan principal.
  • Prematurely canceled credit insurance for some borrowers. Some borrowers had claims improperly denied because the company had canceled their insurance.
  • Sent inaccurate information to credit reporting agencies. According to the CFPB, CitiFinancial reported some settled accounts as being charged off.
  • Failed to investigate consumer disputes about incorrect information.
The CFPB has ordered the company to pay $4.4 million in consumer restitution and $4.4 million to the CFPB Civil Penalty Fund.

The CFPB said that CitiMortgage flooded borrowers with requests for unnecessary documents when they asked for foreclosure relief.

When a borrower requests foreclosure relief, the servicer asks for documentation in order to evaluate the borrower’s finances. If a borrower doesn’t submit all the required documents with the initial application, CFPB rules require the servicer to inform the borrower of what additional documentation is needed.

“However, some borrowers who asked for assistance were sent a letter by CitiMortgage demanding dozens of documents and forms that had no bearing on the application or that the consumer had already provided,” the CFPB said. “Many of these documents had nothing to do with a borrower’s financial circumstances and were actually not needed to complete the application. Letters sent to borrowers in 2014 requested documents with descriptions such as ‘teacher contract,’ and ‘Social Security award letter.’”

CitiMortgage requested such unnecessary documents of about 41,000 customers, according to the CFPB. In doing so, the company violated the Real Estate Settlement Procedures Act (RESPA) and Dodd-Frank’s prohibition against deceptive practices.

The CFPB ordered CitiMortgage to pay $17 million in consumer relief to about 41,000 borrowers who received “improper letters” from the company. The company must also pay $3 million to the CFPB Civil Penalty Fund.

 

Related stories:
CFPB slaps another credit reporting agency with fine

CFPB slaps TransUnion with $17 million penalty

COMMENTS

  • by | 1/24/2017 12:34:49 PM

    This is just a slap on the wrist. CitiMortgage is by far the most unprofessional financial institution I have dealt with on both a professional and personal level.

  • by | 1/24/2017 12:50:24 PM

    This was common practice with all the big banks, they only offered modification options and foreclosure avoidance if the property was under water. When there was equity in the property no modification was offered and it would then be pushed to foreclosure so they could steal the equity in the property.

  • by CEIII | 1/24/2017 12:52:57 PM

    If you think Citi is bad wait until they investigate Caliber which has to be the worst mortgage company of them all!!

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