In September 2014, the CFPB ordered Flagstar Bank refund “$27.5 million to affected consumers” and imposed “$10 million in fines,” alleging it took “too long to process applications for foreclosure relief and finalizing permanent loan modifications; failing to inform borrowers when their application was incomplete; and denying loan modifications to qualified borrowers.”

• Flagstar Bank is based in Michigan and, as of 2014, had $9.9 billion in assets. [Rachel Witkowski, “CFPB Launches ‘New Era’ of Mortgage Servicing Enforcement”, National Mortgage News, 09/30/14]

• The servicing rule that Flagstar Bank violated was not in effect in 2011 when the CFPB began its investigation of the bank, a Bureau employee said “it also cited Flagstar under the authority of the Dodd-Frank Act, which allows the CFPB to target unfair, deceptive and abusive practices.” [Rachel Witkowski, “CFPB Launches ‘New Era’ of Mortgage Servicing Enforcement”, National Mortgage News, 09/30/14]

• A contributing factor in the bank’s unacceptably long processing times for applications was “that Flagstar was not fully staffed to handle the large influx of modification requests from borrowers.” As of 2011, “Flagstar had 13,000 active loss mitigation applications but only 25 full-time employees and a third-party vendor in India who was reviewing those applications, the CFPB said.” The CFPB’s mortgage servicing rule mandates a turnover time of no more than 30 days “if it receives a complete application more than 37 days before a foreclosure sale.” [Rachel Witkowski, “CFPB Launches ‘New Era’ of Mortgage Servicing Enforcement”, National Mortgage News, 09/30/14]

• Of the “40,000 delinquent borrowers from 2011 to 2013” that Flagstar serviced, “6,500 borrowers were affected by Flagstar’s faulty modification practices during this time, of which, 2,000 applicants were foreclosed upon by Sept. 4” of 2014. [Rachel Witkowski, “CFPB Launches ‘New Era’ of Mortgage Servicing Enforcement”, National Mortgage News, 09/30/14]

• In addition to the money returned to customers and the fine imposed by the CFPB, Flagstar was required to launch “an outreach for potential modification borrowers that includes ‘a door knocking campaign and translations services.'” The bank was also barred “from acquiring servicing rights for default loan portfolios until it can prove it is in compliance with the new servicing standards.” [Rachel Witkowski, “CFPB Launches ‘New Era’ of Mortgage Servicing Enforcement”, National Mortgage News, 09/30/14]