Flagstar to pay .6M over flood insurance violations
The Office of the Comptroller of the Currency (OCC) issued a consent order against Michigan-based Flagstar Bank that levies a $3.62 million civil penalty over violations of the Flood Disaster Protection Act,the regulator said on Thursday.
The consent order states that between a three-year period – from February 2017 through February 2020 – the bank’s risk assessment, internal controls, and training led to various violations. It also said that the bank had an inadequate third-party risk management program for its loan servicing.
A Flagstar Bank spokesperson declined to comment on the consent order.
According to the regulator, the bank violated the FDPA to “make, increase, extend, or renew loans” secured by properties in special flood hazard areas until after it obtained proof of adequate insurance. In addition, Flagstar violated the rules regarding timely pay for flood insurance premiums collected in escrow or to provide adequate notices to borrowers, including if a change in servicer occurred.
In the consent order, OCC stated that the bank violated the Flood Act to provide borrowers with notice of inadequate flood insurance and force place adequate insurance if not obtained by the borrower in 45 days.Flagstar Bank originated almost $40 billion in mortgage loans from January to September 2021, an 11.4% increase year-over-year, making it the 19th-largest mortgage lender in the U.S., according to Inside Mortgage Finance. At the end of the third quarter, Flagstar also had $41.7 billion in owned mortgage servicing, a decrease of 10% compared to the same period of 2020.
In April, New York Community Bank, one of New York City’s largest multifamily lenders, announced the acquisition of Flagstar Bancorp, Flagstar Bank’s parent company, in an all-stock merger valued at $2.6 billion.
NYCB had essentially exited the residential mortgage banking business in 2017 after selling its origination and servicing platforms. Despite the deal, Flagstar’s brand will be maintained in the Midwest. Flagstar’s mortgage division will also preserve the brand. Other states will retain their current branding.
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