The Consumer Financial Protection Bureau (CFPB) has announced significant enforcement actions against two companies, Sutherland Global and NOVAD Management Consulting, for alleged illegal practices that adversely affected older homeowners.
Sutherland Global, based in Pittsford, New York, and NOVAD, headquartered in Landover, Maryland, operated a Home Equity Conversion Mortgage (HECM) servicing operation on behalf of the U.S. Department of Housing and Urban Development (HUD). The CFPB accuses them of neglecting their duties, leading to severe consequences for senior borrowers.
According to the CFPB, these companies failed to maintain adequate staffing to handle up to 150,000 borrowers annually, resulting in systematic failures to address homeowner requests promptly. This neglect reportedly caused financial harm, including unnecessary costs and missed opportunities for borrowers.
"Older homeowners did not choose Sutherland and NOVAD as their reverse mortgage servicer, and the CFPB is holding these defendants accountable for their unlawful neglect," said CFPB Director Rohit Chopra.
Among the reported issues, the companies allegedly mishandled borrower requests for loan assistance, misled homeowners about their mortgage status, and failed to provide timely responses to critical homeowner inquiries.
As a result of the enforcement , Sutherland Global and NOVAD are banned from engaging in reverse mortgage activities. Sutherland Global and its subsidiaries must pay $11.5 million in redress to affected consumers and a civil penalty of approximately $5 million. NOVAD, due to financial constraints, will contribute $1 to the CFPB's victims relief fund, potentially allowing for further relief in the future.
In response to the CFPB's findings, Sutherland Global stated that it disagrees with the allegations but chose to settle to resolve the matter. The company emphasized that its role was limited as a subcontractor to NOVAD and did not have direct oversight of HUD's reverse mortgage servicing guidelines.
The HECM servicing contract, previously held by NOVAD, was reassigned to Compu-Link in December 2022, marking a shift aimed at addressing industry concerns and rebuilding trust among reverse mortgage stakeholders.
Industry experts, including Dan Hultquist, author of Understanding Reverse, expressed concerns over the impact of such servicing failures on the industry's reputation but acknowledged efforts to improve trust and service quality moving forward.
The CFPB's enforcement actions underscore the importance of regulatory compliance and consumer protection in the reverse mortgage sector, urging stricter adherence to servicing standards to prevent similar issues in the future.