CFPB Has Banned Novad Consulting From Servicing Reverse Mortgages For Failing To Properly Communicate With Mortgage Borrowers

The CFPB has banned Novad Consulting from servicing reverse mortgages. HUD and CFPB had first ordered the company to stop illegal activities that harmed older homeowners.

The CFPB found that NOVAD Management Consulting had inadequate resources and staffing to handle as many as 150,000 borrowers. As a result, this caused systematic failures to respond to thousands of homeowner requests for assistance. Poor staffing also had caused financial harm to borrowers. This included losing out on home sales and paying unnecessary costs.

The order permanently bans NOVAD from engaging in reverse mortgage activities.

The CFPB found NOVAD was unprepared to support the hundreds of thousands of older homeowners whose reverse mortgages. They also found Novad ignored complaints and calls for help and they let problems snowball into disasters. 

NOVAD formed a loan servicing operation to service reverse mortgages on behalf of HUD under the Obama Administration in 2014.

Federal law requires a servicer to respond to consumer requests for information about their loan in a timely manner. That requirement is also important to protect reverse mortgage borrowers. Reverse mortgage borrowers are responsible for property taxes and insurance. The are also responsible for other applicable fees and assessments.

For years, borrowers could not get in contact with anyone at Novad. As a result, the CFPB found Novad failed to respond to thousands of homeowner requests for loan payoff statements or requests for general information. They allowed problems to fester to critical points. The company’s inaction resulted in borrowers losing out on home sales, paying unnecessary costs, and fearing foreclosure.

The CFPB found that NOVAD violated both the Consumer Financial Protection Act and the Real Estate Settlement Procedures Act. Specifically, the companies harmed older adults with a reverse mortgage by:

Hanging homeowners out to dry:

Novad failed to communicate stopped homeowners from being able to prove occupancy or obtain loan payoff statements. The company also failed to recommend alternatives to foreclosure.

Falsely telling homeowners they were in default:

The company sent false repayment letters to older adult homeowners. These letters stated that their reverse mortgage loans were due and must be paid within 30 days. Novad also told them the payment was due to a default condition when no such trigger event had occurred. The company would also ignore attempts by borrowers to address and correct the “due and payable” letters.

The CFPB’s Enforcement Action Against Novad Consulting

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against nonbank financial institutions, including non-bank mortgage companies, for violating consumer financial protection laws, including the Real Estate Settlement Procedures Act, or for unfair, deceptive, and abusive acts or practices.

The CFPB issued separate orders against Sutherland and NOVAD. Today’s CFPB order against Sutherland requires the company to:

• Cease reverse mortgage servicing activity: The order permanently bans Sutherland Global and Sutherland Government Solutions from reverse-mortgage servicing. It also imposes strict compliance requirements on Sutherland Mortgage Services should it engage in reverse mortgage activities in the future.
• Provide over $11 million in consumer redress: Sutherland must pay $11.5 million to reverse mortgage borrowers financially harmed by the company’s illegal activities.
• Pay $5 million in civil penalties: Sutherland must pay a civil penalty of $5 million to the CFPB, which will be deposited in the CFPB’s victims relief fund.

The CFPB Has Banned Novad: Here Is What They Being Required To Do: 

• Permanently cease all reverse mortgage servicing activity: The order permanently bans NOVAD from reverse-mortgage servicing, including advertising, marketing, promoting, offering, selling, or servicing reverse mortgages.
• Pay a civil penalty: Due to NOVAD’s declaration of an inability to pay, the order requires NOVAD to pay $1 to the CFPB’s victims relief fund. By requiring NOVAD to pay at least $1 in penalties, the CFPB can make consumers eligible for additional relief from the CFPB’s victims relief fund in the future.

Read today’s order against NOVAD.

Reverse mortgage borrowers can review their rights, find key terms, and learn about common issues on the CFPB’s website. When considering options for housing changes, including trying to make the most of their home as an asset, older adults and their family members can consult the CFPB’s housing guide for more information.

Consumers can submit complaints about financial products and services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

Employees who believe their company has violated federal consumer financial protection laws are encouraged to send information about what they know to whistleblower@cfpb.gov. To learn more about reporting potential industry misconduct, visit the CFPB’s website.

Read More About Novad Consulting On MFI-Miami.com Or Check Out The Articles Below: 

Novad Management In Gambit To Keep HECM Contract With HUD

Novad Management Consulting Is Still Jerking Seniors Around

Are Novad Management Consulting CEO Davon Kelly And His Staff MIA?

Novad Management Consulting: Worst Reverse Mortgage Servicer Ever!

Reverse Mortgage Scam Alert! Novad And FHA Defraud US Army Veteran