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CFPB Fines Carrington Mortgage $5.25M For Cheating Homeowners 

David Krechevsky
Nov 17, 2022
CFPB Headquarters

The mortgage servicing company failed to deliver forbearance provided for under CARES Act.

The Consumer Financial Protection Bureau (CFPB) has imposed a $5.25 million penalty on California-based Carrington Mortgage Services, accusing it of cheating homeowners facing financial hardship out of CARES Act benefits.

According to a consent order issued Thursday, the CFPB found that Carrington misled certain homeowners who had sought a mortgage forbearance under the CARES Act into paying improper late fees, as well as deceived consumers about forbearance and repayment options, and inaccurately reported the forbearance status of borrowers to the big three credit reporting companies: Equifax, Experian, and TransUnion. 

Carrington Mortgage has signed a “Stipulation and Consent to the Issuance of a Consent Order,” in which it does not admit or deny any findings of fact or conclusions in the CFPB's consent order, but "admits the facts necessary to establish the (CFPB’s) jurisdiction" and the subject matter of the action.

In a news release, Carrington said it "agreed to settle" with the CFPB "without admitting or denying the CFPB's claims, to put this matter behind it and avoid the cost and distraction of prolonged litigation, despite its disagreement with the CFPB's position."

The CFPB said it is ordering Carrington to repay any late fees not already refunded, repair its faulty business practices, and pay a $5.25 million penalty that will be deposited into the CFPB’s victims relief fund.

The CARES Act — officially the Coronavirus Aid, Relief, and Economic Security Act — is a $2.2 trillion economic stimulus bill approved by Congress and signed into law by President Trump in March 2020.

The CFPB found that Carrington failed to implement many protections provided to borrowers with federally backed mortgage loans who were experiencing financial hardship during the COVID-19 public health emergency.

“Carrington Mortgage unlawfully withheld legally mandated pandemic protections, wrongly imposed fees, and reported false information to credit reporting companies,” CFPB Director Rohit Chopra said in a statement. “Homeowners were misled and denied key protections at a time when they were in most need of help.”

Carrington Mortgage is a non-bank mortgage servicer headquartered in Anaheim, Calif. It operates in all 50 states and services a large number of federally-backed mortgage loans, which are made or guaranteed by federal agencies or government-sponsored entities (GSEs). 

As of September 2020, Carrington serviced nearly 500,000 federally-backed mortgage loans. More than 65% were Federal Housing Administration (FHA) loans; nearly 20% were U.S. Department of Agriculture loans; slightly more than 10% were Veterans Benefits Administration (VA) loans, and about 5% were loans backed by GSEs (Fannie Mae & Freddie Mac).

One key protection of the CARES Act was that mortgage servicers were required to provide forbearances of up to 180 days upon request. Borrowers were also afforded certain credit reporting protections. Federal agencies and GSEs also issued their own guidelines to servicers about assisting borrowers during the pandemic.

The CFPB investigated Carrington and found it violated the Consumer Financial Protection Act when it misrepresented the requirements of the CARES Act and related federal agency guidelines. The company misrepresented to borrowers that they could not have 180 days of forbearance upon request, and that certain borrowers could not have forbearance at all, the CFPB said. 

Carrington also implied that homeowners had to make more detailed attestations than were actually required by law, and the company imposed late fees when they were not permitted, the bureau said.

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial protection laws, including engaging in unfair, deceptive, or abusive acts or practices. Its investigation found that Carrington violated the act’s prohibition on deceptive conduct, as well as certain provisions of the Fair Credit Reporting Act and its implementing regulation, Regulation V.

In its news release, Carrington calls the CFPB action "regulatory overreach," and states that it "worked tirelessly to help borrowers in need, completing more than 134,000 forbearance agreements with its customers. Data shows these efforts were extremely successful: just over 94% of those borrowers seeking assistance successfully resolved their delinquency after forbearance or remain on a forbearance agreement as they need continued payment relief." 

"In trying to help borrowers affected by the COVID-19 pandemic, Carrington acted in good faith and focused on delivering a benefit to consumers," said Bruce Rose, CEO and founder of The Carrington Cos., the parent company of Carrington Mortgage Services. "I am proud of what our people were able to do for borrowers suffering in the midst of the pandemic. The settlement does not demand additional consumer remediation, which reflects the lack of consumer harm in this matter."

While Rose states the settlement "does not demand additional consumer remediation," it in fact requires Carrington to:  

  • Provide redress to consumers: Carrington must conduct an audit to ensure any improperly charged late fees have been refunded to consumers, and if not, to refund them.
  • Repair its faulty business practices: Carrington must assess customer service staffing and provide training relating to applicable CARES Act and agency and GSE guidelines. The company must also establish policies and procedures to prevent the issues from recurring.
  • Pay $5.25 million in fines: Carrington must pay a $5.25 million penalty to the CFPB, which will be deposited into the CFPB’s victims relief fund.
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