CFPB fines BSI $200K for mishandling loan transfers in loss mitigation

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BSI Financial agreed to pay a $200,000 fine along with restitution to settle allegations from the Consumer Financial Protection Bureau that it mishandled mortgage servicing rights transfers for loans in the loss-mitigation process.

The Irving, Texas-based mortgage servicer entered into the consent order without admitting or denying any of the findings or conclusions.

Besides the fine, BSI must put at least $36,500 into a segregated account to provide restitution to affected borrowers. Some borrowers may receive a credit to their loan principal.

Previously, CFPB Director Kathy Kraninger said the agency was looking to shift away from the enforcement actions, large fines and public shaming that took place under Obama-appointed predecessor Richard Cordray.

The loans involved were onboarded prior to September 2014 and "were isolated incidents and have been resolved in the ordinary course of business," a statement on the company's website said.

"The CFPB essentially asked us to create a data integrity program, so we developed technology that drives the best data integrity program in the industry," said BSI President and CEO Gagan Sharma in the statement. "We remain committed to being compliant with all rules and guidelines."

BSI, whose corporate name is Servis One Inc., was accused of failing to recognize it was onboarding loans with pending loss-mitigation applications, in-process loan modifications and permanent loan modifications in violation of the Real Estate Settlement Procedures Act, the consent order stated.

While BSI has primarily been a subservicer, earlier this year it raised capital to purchase MSRs for its own account.

A second RESPA violation involved transfers with incomplete or inaccurate escrow information that resulted in the failure to pay property taxes and homeowners insurance premiums. A related violation involves failing to provide oversight to three service providers responsible for disbursing those funds.

BSI was also accused of failing to "enter promptly interest rate adjustment loan data for adjustable-rate mortgage loans into its servicing system," which was a violation of the Truth-in-Lending Act. The final accusation involved having an inadequate document management system.

BSI allegedly did not review data from the prior servicer for loans it onboarded during the period between September 2012 and September 2014. Plus, the order continued, BSI did not enter loss-mitigation information from the prior servicer into its system in a "fully automated manner."

Furthermore, BSI's practice was not to deliver loss-mitigation information in a manner that allowed servicers it transferred MSRs to for that company to identify customers engaged in that process, the CFPB alleged.

When it came to the missed or late escrow payments, while BSI said it paid the penalties assessed to borrowers, the CFPB alleged it did not reimburse customers who had to get more costly homeowners coverage and it did not identify and reimburse customers who had claims denied because their policies were cancelled.

Besides paying the fine, BSI must establish a comprehensive data integrity program that includes the designation of an employee or employees to oversee it; sufficient, trained personnel to perform the program's requirements in a timely and legal manner; and a risk assessment of the completeness, accuracy and validity of consumer loan data and documents. It also includes establishing due diligence procedures for onboarding and off-boarding MSRs.

"In February 2017, BSI Financial launched a new analytics application that performs loan-level analysis of all loans we service, as well as new loans being boarded," the company's statement said. "Named BSI ASSET360, the application scours 10,000 standardized data elements and examines the entire portfolio daily, applying more than 1,000 business rules. Any exceptions or anomalies it finds are then referred to operations teams for research and remediation."

The consent order also placed limitations on the transfer of loans — both inbound and outbound — in loss mitigation.

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Enforcement actions RESPA TILA MSR Loss mitigation Subservicing Penalties and fines CFPB