What's Happening?
Select Portfolio Servicing, a major sub-prime mortgage servicer, has agreed to a $4.6 million settlement with the California Attorney General over allegations of violating mortgage servicing and debt collection laws during the COVID-19 pandemic. The settlement,
which is pending court approval, includes $1.6 million in civil penalties and $3 million in consumer relief. The company is also required to implement changes to ensure homeowners receive accurate information and support when seeking loan modifications and foreclosure-prevention alternatives. The California Department of Justice's investigation found that SPS failed to provide adequate information about COVID-19 forbearance plans and incorrectly informed borrowers about late fees during the pandemic.
Why It's Important?
This settlement highlights the ongoing challenges faced by homeowners during the pandemic and the importance of regulatory oversight in the mortgage servicing industry. The enforcement of California's Homeowner Bill of Rights aims to protect homeowners from unfair foreclosure practices and ensure they have access to necessary support. The case underscores the need for mortgage servicers to adhere to legal standards and provide transparent communication to borrowers, especially during times of financial hardship. The outcome of this settlement could influence future regulatory actions and set a precedent for how similar cases are handled.
What's Next?
Following the settlement, Select Portfolio Servicing will need to implement the agreed-upon changes to its practices. The California Attorney General's office may continue to monitor compliance and take further action if necessary. This case may prompt other states to review their own mortgage servicing regulations and consider similar enforcement actions. Homeowners and consumer advocacy groups will likely continue to push for stronger protections and oversight in the mortgage industry to prevent future violations.
