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, Rob Bonta, over allegations of violating mortgage servicing and debt collection laws during the COVID-19 pandemic.
The settlement, which is pending court approval, involves $1.6 million in civil penalties and $3 million in consumer relief. The California Department of Justice's investigation revealed that the company failed to provide adequate information to homeowners about COVID-19 forbearance plans and incorrectly informed borrowers that late fees would be charged for missed payments. Additionally, the company did not ensure that homeowners seeking foreclosure prevention alternatives received the necessary support, as required under California's Homeowner Bill of Rights.
Why It's Important?
This settlement underscores the importance of regulatory compliance in the mortgage servicing industry, particularly during times of crisis like the COVID-19 pandemic. The enforcement of California's Homeowner Bill of Rights is crucial in protecting homeowners from unfair practices and ensuring they receive accurate information and support. The financial penalties and consumer relief measures aim to rectify the harm caused to affected homeowners and serve as a deterrent to other mortgage servicers. This case highlights the ongoing scrutiny of financial institutions and the need for transparency and accountability in their dealings with consumers.
What's Next?
Pending court approval, Select Portfolio Servicing will need to implement changes to its practices to ensure compliance with the Homeowner Bill of Rights. This includes providing accurate information to homeowners and ensuring they have access to necessary support when seeking loan modifications or foreclosure-prevention alternatives. The outcome of this settlement may prompt other states to review and enforce similar consumer protection laws, potentially leading to further regulatory actions against non-compliant mortgage servicers.
