California reaches $4.6M settlement with Select Portfolio Servicing

California Attorney General Rob Bonta on Friday announced a $4.6 million settlement with California-based mortgage servicer Select Portfolio Servicing (SPS). Under the agreement, which is subject to court approval, SPS will pay $1.6 million in civil penalties and provide $3 million in consumer restitution to affected borrowers.

The settlement also requires the company to overhaul parts of its servicing practices, including how it communicates with borrowers who seek loan modifications and other foreclosure-prevention assistance.

The move resolves allegations that the company violated state and federal mortgage servicing and debt collection laws while handling homeowners affected by the COVID-19 pandemic.

The California Department of Justice alleged that SPS failed to provide borrowers with adequate information about COVID-19 mortgage forbearance programs and their options for avoiding foreclosure after these programs ended.

The state also alleged that SPS sent inaccurate mortgage statements to some borrowers in forbearance, indicating they could be charged late fees for missed payments.

“Californians are facing a crisis of affordability, and many of our residents struggle every month to keep a roof over their heads,” Bonta said in a statement.

Bonta said the settlement resolves findings that SPS violated homeowner protection laws during the pandemic, leaving some borrowers without clear or accurate information during a period of financial uncertainty.

The investigation — which was based in part on information provided by housing advocacy groups Housing and Economic Rights Advocates and California Rural Legal Assistance, Inc. — determined that SPS also failed to conduct individualized discussions with borrowers nearing the end of their forbearance periods and did not provide adequate support through the single points of contact required under California law.

State investigators further alleged that SPS failed to ensure borrowers could submit loan modification applications within timelines established under California’s Homeowner Bill of Rights. The law mandates that mortgage servicers provide foreclosure-prevention information to struggling borrowers; assign a dedicated point of contact for loss-mitigation applications; and generally halt foreclosure proceedings while a completed loan modification application is under review.

Borrowers eligible for restitution have already been identified and will receive payments automatically, according to the attorney general’s office.

SPS did not respond to HousingWire‘s request for comment at the time of publication.