Charged with “illegally blocking borrowers’ attempts to save their homes,” the Consumer Financial Protection Bureau (CFPB) has fined Flagstar Bancorp $37.5 million for violating the agency’s mortgage servicing rules, reports housingwire.com. Flagstar allegedly took excessive time to process borrowers’ applications for foreclosure relief, denied loan modifications to qualified borrowers, and neglected to inform borrowers if their application was incorrect. In some cases Flagstar is accused of disrupting permanent loan modifications by delaying them until the documents expired.

“In Flagstar’s loss mitigation call center, the average call wait time was 25 minutes and the average call abandonment rate was almost 50%,” the CFPB said. “And Flagstar’s loss mitigation application backlog numbered well over a thousand.” The company had 26 employees reviewing a backlog of 13,000 loss mitigation applications, requiring up to nine months to review one application. “Flagstar’s failures as a mortgage servicer hurt homeowners,” the CFPB said. “In many cases, Flagstar deprived borrowers of the ability to make an informed choice about how to save or sell their home, caused borrowers to drop out from the loss mitigation process entirely, and drove borrowers into foreclosure.”

The CFPB has ordered Flagstar to pay 6,500 consumers $27.5 million, with $20 million going to 2,000 victims of foreclosures, which does not preclude the wronged individuals from taking action on their own. The company has been involved in discussion with CFPB, as MHProNews has learned, to try and reach a settlement. ##

(Image credit: Consumer Financial Protection Bureau)