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While borrowers were trying to save their homes from foreclosure, Flagstar Bank sat on important documents and "drove borrowers into foreclosure," authorities said Monday.
That led to over 2,000 foreclosures in the last three years, according to the Consumer Financial Protection Bureau.
The bureau said some loan modification applications that should have taken a few days to process took up to nine months to be reviewed. The delays were in part because the bank was understaffed: At one point, just 25 employees and a third-party contractor were assigned to handle 13,000 applications.
Flagstar will pay $27.5 million to 6,500 victims of the delays, as well as a $10 million fine. It's also barred from acquiring certain types of new business until the government is convinced it can operate properly. The penalty is the CFPB's first under new mortgage rules.
Product or Service Mentioned: Flagstar Bank Loan Modification.
Reason of review: Poor customer service.
Monetary Loss: $43000.