Seterus, Inc. and Kyanite Services, Inc.
On December 18, 2020, the Consumer Financial Protection Bureau (Bureau) issued a consent order against Seterus, Inc. (Seterus), a former mortgage servicer based in North Carolina, and Kyanite Services, Inc. (Kyanite), Seterus’s former parent company and its successor in interest. The consent order addresses widespread failures in Seterus’s handling and processing of struggling homeowners’ applications for loss mitigation options to avoid foreclosure. The Bureau found that Seterus, which used automated processes for handling loss mitigation applications, violated the Consumer Financial Protection Act of 2010’s (CFPA) prohibition of unfair acts and practices by systematically failing to accurately review, process, track, and communicate to borrowers information regarding their applications, and deceptive acts and practices by sending numerous borrowers acknowledgment notices regarding their applications that misrepresented the status of borrower documents and provided inaccurate due dates for submission of borrower documents. The Bureau also found that Seterus violated Regulation X, which implements the Real Estate Settlement Procedures Act, by sending numerous acknowledgment notices that failed to state the additional documents and information borrowers needed to submit to complete their loss mitigation applications or failed to provide a reasonable due date for submission of borrower documents; failing to exercise reasonable diligence in obtaining documents and information necessary to complete borrowers’ loss mitigation applications; failing to properly evaluate borrowers who submitted complete loss mitigation applications for all loss mitigation options available to the borrower; and failing to treat certain applications as “facially complete” when required under Regulation X. These violations also constitute violations of the CFPA. The consent order requires Kyanite, as Seterus’s successor in interest, to pay $4,932,525 in total redress to approximately 11,866 of the consumers to whom Seterus sent a defective acknowledgment notice. The consent order also imposes a $500,000 civil money penalty and includes injunctive relief that would apply in the event Kyanite engages in mortgage servicing operations.