CFPB’s Case Against Sutherland: What Reverse Mortgage Borrowers Need to Know

The Consumer Financial Protection Bureau (CFPB) issued an enforcement order against Sutherland Global Services, Inc., Sutherland Mortgage Services, Inc., and Sutherland Government Solutions, Inc. for serious failures in the servicing of federally insured reverse mortgages. These failures left many older homeowners confused, fearful of foreclosure, and in some cases facing financial harm when they tried to resolve problems with their loans.

This article explains what reverse mortgages are, summarizes the issues identified by the CFPB, and outlines what borrowers can learn from this case to better protect themselves.

Reverse Mortgages and Why Servicing Matters

A reverse mortgage is a loan that allows homeowners, typically age 62 or older, to convert part of their home equity into cash while remaining in the home, most commonly through the federal Home Equity Conversion Mortgage (HECM) program insured by the U.S. Department of Housing and Urban Development (HUD).

Unlike traditional mortgages, reverse mortgage borrowers are not required to make monthly principal and interest payments. Instead, the loan becomes due when a triggering event occurs, such as:

• The borrower dies.
• The borrower sells the home.
• The borrower permanently moves out of the home.
• The borrower fails to meet ongoing obligations such as paying property taxes, homeowners insurance, or maintaining the property.

Because the rules are complex and many borrowers are older adults, the quality of servicing and customer support is critical. Servicers must:

• Send accurate and clear communications.
• Promptly respond to borrowers’ questions and disputes.
• Work with heirs and surviving spouses after a borrower dies.
• Follow federal laws governing error resolution and information requests.

Background of the CFPB’s Action Against Sutherland

Sutherland and its related entities helped operate a large customer service platform for reverse mortgages on behalf of HUD, supporting as many as 150,000 borrowers. According to the CFPB, this operation lacked adequate resources and staffing, which led to widespread failures in handling borrower communications and servicing tasks.

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In June 2024, the CFPB issued an order finding that Sutherland’s conduct violated:

• The Consumer Financial Protection Act of 2010 (CFPA), which prohibits unfair, deceptive, or abusive acts and practices in consumer financial products and services.
• The Real Estate Settlement Procedures Act (RESPA) and its Regulation X, which require servicers to acknowledge, investigate, and timely respond to written notices of error and requests for information from borrowers.

The Bureau also issued a separate order against NOVAD Management Consulting, a contractor that worked with Sutherland on reverse mortgage servicing.

Key Problems Identified in Sutherland’s Servicing

The CFPB found multiple categories of harmful conduct in how Sutherland handled reverse mortgage accounts and borrower communications.

1. Misleading “Due and Payable” and Repayment Letters

One of the most serious findings was that Sutherland sent repayment, or “due and payable,” letters that often gave borrowers the false impression that:

• Their loans were already in default.
• The full balance of the loan had to be paid immediately.
• Foreclosure was imminent if they did not act at once.

For reverse mortgage borrowers—many of whom are older adults living on fixed incomes—such letters can cause intense fear and confusion. The CFPB determined that these communications were deceptive and unfair under the CFPA because they misrepresented the borrower’s status and options.

2. Failing to Respond to Time-Sensitive Requests

Sutherland’s customer service operation frequently:

• Did not acknowledge or respond to written requests for information.
• Ignored or delayed responses to error notices sent by borrowers.
• Failed to provide substantive answers even when it did respond.

Under RESPA and Regulation X, servicers must acknowledge and respond to borrower error notices and information requests within specific timeframes, and they must reasonably investigate and correct errors when identified. The CFPB found that Sutherland violated these requirements, leaving borrowers without clear answers about crucial issues such as:

• How to cure alleged defaults.
• Options to sell the home to satisfy the loan.
• Steps heirs could take after a borrower’s death.

3. Poor Error Resolution and Follow-Up

Beyond failing to respond, Sutherland often did not adequately investigate servicing errors or correct problems when they were brought to its attention. Examples of potential issues included:

• Incorrect assessment that a borrower had died or permanently left the property.
• Misapplication of payments for taxes or insurance.
• Failure to reflect valid extensions or loss mitigation options in the account.

The CFPB concluded that this pattern of inaction was both unfair and abusive because it left borrowers to bear the consequences of servicer errors they could not fix on their own.

4. Lack of Two-Way Communication

Another key concern was that Sutherland did not maintain effective two-way communication with borrowers. For instance, after sending alarming repayment letters, the company frequently:

• Could not be reached by phone in a timely manner.
• Did not provide clear explanations or next steps.
• Failed to follow up with written confirmation of options discussed.

This breakdown in communication is particularly harmful in reverse mortgage servicing, where borrowers may have limited familiarity with complex loan terms and may rely heavily on written notices and call center representatives for guidance.

How Borrowers Were Harmed

The CFPB determined that Sutherland’s conduct led to concrete financial and emotional harms for affected reverse mortgage borrowers.

What the CFPB’s Order Requires

The CFPB used its authority under the CFPA to impose a range of remedies on Sutherland and related entities.

Permanent Restrictions on Reverse Mortgage Activities

• Sutherland Global Services and Sutherland Government Solutions are permanently banned from engaging in reverse mortgage servicing.
• Sutherland Mortgage Services is subject to strict compliance requirements and must develop a detailed plan to follow federal law before it may perform reverse mortgage servicing in the future.

Monetary Redress and Penalties

• Sutherland must pay $11.5 million in consumer redress, to be distributed by the CFPB to harmed reverse mortgage borrowers.
• Sutherland must also pay a $5 million civil money penalty, which will be deposited into the CFPB’s victims relief fund.
• In the separate order against NOVAD, the Bureau required a civil penalty of $1, reflecting the company’s stated inability to pay but preserving eligibility for additional relief through the victims relief fund.

Compliance and Oversight

The order imposes ongoing obligations on Sutherland, including:

• Developing written compliance policies and procedures for any future reverse mortgage servicing by Sutherland Mortgage Services.
• Ensuring that staffing, training, and systems are sufficient to meet RESPA and CFPA requirements.
• Reporting to the CFPB on implementation of the order and providing documentation if the company engages in covered activities in the future.

What This Case Means for Older Homeowners

The Sutherland enforcement action highlights broader issues in the reverse mortgage servicing market. Federal regulators, including the CFPB and HUD, have noted that older homeowners can be especially vulnerable to servicing errors because of the complexity of the products and the emotional stakes of potentially losing a home.

Key lessons for borrowers and families include:

• Servicers have legal duties. Companies must communicate accurately, respond to written requests in defined timeframes, and correct errors under RESPA and Regulation X.
• Misleading threats are not allowed. Communications that exaggerate the risk of immediate foreclosure or misstate the borrower’s status can be considered unfair or deceptive under the CFPA.
• Borrowers have rights to challenge errors. If a borrower believes their reverse mortgage is being mishandled, they can send a written notice of error and request information that the servicer is legally required to address.
• Regulators can secure redress. As this case shows, the CFPB can require companies that violate the law to pay restitution and civil penalties.

Practical Tips for Reverse Mortgage Borrowers

Based on issues seen in recent enforcement actions, including the Sutherland case, borrowers and their families can take several steps to protect themselves.

1. Keep Organized Records

• Save all letters, statements, and emails from your reverse mortgage servicer.
• Keep notes of phone calls, including date, time, and the name of the representative.
• Retain proof of property tax and insurance payments.

2. Act Quickly When You Receive a Concerning Letter

• Do not ignore repayment or “due and payable” notices.
• Call the servicer using a verified phone number and ask for a clear explanation.
• Follow up in writing if you disagree with the notice or need more information.

3. Use Your RESPA Rights

Under RESPA and Regulation X, borrowers can send a written notice of error or request for information when they believe their mortgage account has been mishandled.

• Clearly label your letter as a notice of error or request for information.
• Include your name, address, and loan number.
• Describe the issue in detail and include copies of supporting documents.
• Send the letter to the servicer’s designated address for such requests, if provided.

4. Involve Family Members or Advisors

• Consider authorizing a trusted family member or advisor to speak with the servicer on your behalf.
• Share copies of important letters and statements with someone you trust.
• Seek independent legal or housing counseling advice if you receive a foreclosure-related notice.

5. Reach Out to Regulators or Counselors

• Borrrowers can submit complaints about mortgage servicers to the CFPB, which reviews complaints and forwards them to companies for response.
• HUD-approved housing counselors can help reverse mortgage borrowers understand their options, especially when facing repayment or foreclosure.

Frequently Asked Questions (FAQs)

Q1: What did the CFPB find Sutherland did wrong?

According to the CFPB, Sutherland sent misleading repayment letters, failed to promptly and adequately respond to borrowers’ error notices and information requests, and did not effectively investigate and correct servicing problems. These actions were found to violate the Consumer Financial Protection Act, RESPA, and Regulation X.

Q2: Does this case mean my reverse mortgage is invalid?

The enforcement action does not cancel or invalidate borrowers’ reverse mortgages. Instead, it addresses how Sutherland and related entities serviced those loans, imposes penalties, and requires redress for harmed consumers.

Q3: How will harmed borrowers receive money from the Sutherland order?

The CFPB’s order requires Sutherland to pay $11.5 million in consumer redress, which will be administered by the Bureau. The CFPB typically identifies eligible consumers using company records and may work with a third-party administrator to distribute payments.

Q4: Can Sutherland still service reverse mortgages?

The order permanently bans Sutherland Global Services and Sutherland Government Solutions from reverse mortgage servicing and imposes strict conditions on any future reverse mortgage activities by Sutherland Mortgage Services. The company must develop and implement a compliance plan before it could resume such work.

Q5: Where can I get help if I think my reverse mortgage is being mishandled?

Borrowers can contact HUD-approved housing counselors for free or low-cost advice on reverse mortgages, and they can submit complaints to the CFPB if they believe their servicer is not following the law. Consulting an attorney experienced in mortgage or elder law may also be appropriate in serious cases.

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Author

Sneha TeteBeauty & Lifestyle Writer

 

Sneha is a relationships and lifestyle writer with a strong foundation in applied linguistics and certified training in relationship coaching. She brings over five years of writing experience to waytolegal,  crafting thoughtful, research-driven content that empowers readers to build healthier relationships, boost emotional well-being, and embrace holistic living.

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