Reverse mortgage borrowers whose loans were previously serviced by U.S. Department of Housing and Urban Development (HUD) subcontractor NOVAD Management Consulting LLC may receive reimbursement checks in the mail following a 2024 enforcement action brought by the Consumer Financial Protection Bureau (CFPB).
The National Reverse Mortgage Lenders Association (NRMLA) notified its members on Friday morning in a memo. The CFPB’s website states that “affected consumers are receiving a refund because of a settlement in this lawsuit” and that as of Jan. 30, victim compensation is ongoing.
In June 2024, the CFPB issued an order that permanently bars Pittsford, New York-based Sutherland Global Services and its subsidiaries, Sutherland Government Solutions, Sutherland Mortgage Services and NOVAD, from servicing reverse mortgages.
The enforcement action stemmed from what the bureau described as illegal servicing failures that harmed older homeowners and caused some to fear losing their homes. NOVAD held HUD’s Home Equity Conversion Mortgage (HECM) servicing contract for assigned loans from 2014 to 2022, and it worked with Sutherland to operate the servicing platform.
The CFPB said the companies failed to maintain a proper amount of staffing to manage as many as 150,000 borrowers per year. This reportedly led to widespread communication breakdowns, including delays or non-responses to borrower requests for loan payoff statements, foreclosure alternatives, lien releases and general information.
The CFPB said some borrowers were incorrectly told their loans were in default or that foreclosure was imminent, even when no triggering event had occurred.
Under federal law, mortgage servicers are required to respond to consumers in a timely manner, a requirement the CFPB said is particularly important for reverse mortgage borrowers, who remain responsible for property taxes, insurance and other obligations.
The bureau said the companies’ failures caused financial harm and emotional distress, particularly among senior homeowners. As a result, the companies are required to pay $11.5 million in restitution to borrowers harmed by their servicing practices.
The CFPB has hired Rust Consulting to administer the restitution payments and respond to consumer inquiries related to the case. Neither the CFPB nor NOVAD and Sutherland Global responded to requests for comment from HousingWire‘s Reverse Mortgage Daily.