The order seeks to permanently bar two Sutherland Global subsidies and Novad Management Consulting from reverse mortgage services and called upon them to pay millions of dollars in redress and a civil monetary penalty.

Sutherland was a subcontractor for Novad, and the two were responsible for servicing Home Equity Conversion Mortgages between 2014 and 2022. HECMs are Federal Housing Administration-insured products available to borrowers 62 and older.

"Sutherland and Novad were unprepared to support the hundreds of thousands of older homeowners whose reverse mortgages the defendants were responsible for," CFPB Director Rohit Chopra alleged in a press release.

"The defendants ignored complaints and calls for help, and they let problems snowball into disasters," he added. CFPB alleged around 150,000 distressed mortgage borrowers per year experienced financial harm as a result.

The companies "systematically failed to respond to thousands of homeowner requests for loan payoff statements, short sales, deeds-in-lieu of foreclosures, lien releases and requests for general information," the bureau further alleged.

"The companies allowed problems to fester to critical points, which resulted in borrowers losing out on home sales, paying unnecessary costs, and fearing foreclosure," the CFPB stated.

In doing this, the companies allegedly violated the Real Estate Settlement Procedures Act and also engaged in unfair, deceptive or abusive acts and practices, such as falsely telling borrowers they were in default or not offering options, according to the CPPB. 

The bureau specifically named two units of Sutherland respectively handling government solutions and mortgage services in its complaint. They have been ordered to pay $11.5 million in redress to customers for their actions.

The CFPB also is ordering both those entities and Novad to collectively pay a roughly $5 million civil money penalty that will go into a relief fund for affected borrowers.

The bureau is asking for $1 million from Novad due to its declaration of an inability to pay.

The companies named in the bureau's order had not responded to inquiries from this publication at the time of this writing.

The CPFB has warned servicers that it won't tolerate what it has called excessive or "junk" fees in many areas, including loss mitigation, stressing that customers have little choice in the matter of who tends to their mortgage after origination.

"Older homeowners did not choose Sutherland and Novad as their reverse mortgage servicer, and the CFPB is holding these defendants accountable for their unlawful neglect," Chopra said.

At one point Novad was the official Department of Housing and Urban Development subservicer, but in 2022, Celink took over that role. Novad lodged a protest against the change at the time, but the Government Accountability Office dismissed it. 

Reverse mortgage servicing is a specialized process, and a relatively limited number of companies are active in the space.

Novad is a Landover, Maryland-based nonbank company and Sutherland Global is a digital services provider with headquarters in Pittsford, New York.