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Citigroup subs pay for mortgage servicing practices

O'Fallon, MO
01/23/2017
Fine Amount: 
$7.4 million
Penalty Type: 
Issued by: 

The Consumer Financial Protection Bureau has announced it has taken separate actions against CitiFinancial Servicing and CitiMortgage, Inc. for their mortgage servicing practices. 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.

CitiFinancial Servicing is made up of four entities incorporated in Delaware, Minnesota, and West Virginia, and headquartered in O’Fallon, Missouri. All are direct subsidiaries of CitiFinancial Credit Company, and an indirect subsidiary of New York-based Citigroup, Inc. As a mortgage servicer, CitiFinancial Servicing collects payments from borrowers for loans it originates. It also handles customer service, collections, loan modifications, and foreclosures. Some consumers who notified CitiFinancial Servicing that they faced a financial hardship were offered “deferments" on their simple-interest mortgage loans. This postponed the consumer’s next payment due date, and the consumer could still be considered current on payments. But CitiFinancial Servicing did not treat a deferment as a request for foreclosure relief options, also called loss mitigation options, as required by CFPB mortgage servicing rules. Postponing the payment meant that when the next payment was finally received, more of it would go to satisfy accrued interest, and less to principal. CitiFinancial Servicing was found to have:

  • Kept consumers in the dark about foreclosure relief options
  • Mislead consumer about the impact of deferring payment due dates
  • Charge consumers for credit insurance that should have been canceled
  • Prematurely canceled credit insurance for some borrowers
  • Send inaccurate consumer information to credit reporting companies
  • Failed to investigate consumer disputes

The Bureau found those actions violated the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, and the Dodd-Frank Act’s prohibition on deceptive acts or practices.

Under the Bureau's Consent Order, CitFinancial Services must (1) pay $4.4 million in restitution to consumers; (2) clearly disclose conditions of deferments for loans; (3) stop supplying bad information to credit reporting companies; and (4) pay a civil money penalty of $4.4 million.

CitiMortgage is incorporated in New York, headquartered in O’Fallon, Missouri., and is a subsidiary of Citibank, N.A. CitiMortgage is a mortgage servicer for Citibank and government-sponsored entities such as Fannie Mae and Freddie Mac. It also fields consumer requests for foreclosure relief, such as repayment plans, loan modification, or short sales. Borrowers at risk of foreclosure or otherwise struggling with their mortgage payments can apply to their servicer for foreclosure relief. In this process, the servicer requests documentation of the borrower’s finances for evaluation. Under CFPB rules, if a borrower does not submit all the required documentation with the initial application, servicers must let the borrowers know what additional documents are required and keep copies of all documents that are sent.

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. 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 sent such letters to about 41,000 consumers. The Bureau found that CitiMortgage violated the Real Estate Settlement Procedures Act, and the Dodd-Frank Act’s prohibition against deceptive acts or practices.

Under the Bureau's Consent Order, CitiMortgage must (1) Pay $17 million in restitution to wronged consumers, (2) Clearly identify documents consumers need when applying for foreclosure relief; (3) Freeze any foreclosures related to the flawed application process and reach out to harmed consumers; and (4) Pay a civil money penalty of $3 million.

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