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Regulators recently offered a rare behind-the-scenes glimpse of what areas they are targeting for enforcement, saying that potential fair lending violations like redlining and how mortgages are priced and serviced remain top priorities for the future.
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WASHINGTON Michigan-based Flagstar Bank will be required to pay $37.5 million in restitution and fines over regulatory allegations it blocked struggling homeowners from receiving foreclosure relief, the Consumer Financial Protection Bureau said Monday.
September 29 -
The Consumer Financial Protection Bureau's action against Flagstar Bank on Monday marked a series of firsts for the agency, including the first time it enforced its new mortgage servicing rules and the first time it banned a servicer from servicing new loans until fixes are made.
September 29
Flagstar Bank had a loss of $27.6 million in the third quarter, driven by a
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Total noninterest income fell about 37% while net interest income rose by about 33%. The bank provisioned $8 million for credit losses, twice the amount it did during the third quarter last year. The net interest margin tightened seven basis points to 2.91%.
Excluding the CFPB penalties, Flagstar generated about $141.5 million combined net interest and noninterest income, barely covering some $140.8 million in "core operating expenses" (what it would have spent for the quarter before the CFPB action).
Even on that basis Flagstar only eked out a profit through crediting itself with $10.4 million for a reassessment of how much it will have to indemnify government loans. Bose George, an analyst for the firm KBW, described this reassessment as a one-time measure.
Flagstar also saw a close to 20% decline in total assets, to $9.6 billion, as a result of continuing divestment of loans. "They've been shrinking their balance sheet for some time now," George said. Net charge-offs were $13.1 million, down about two-thirds from a year earlier. Michigan's housing market was one of the hardest hit in the post-2008 financial crisis.
Notably, total cash and cash equivalents declined from about $2.5 billion to $106.8 million, partially due to the bank repaying Federal Home Loan Bank advances, according to George.
The CFPB's regulatory action was related to improper delays of foreclosure relief and other mortgage-related violations. This was the CFPB's first action enforcing new mortgage servicing rules it issued in January.
