Fay Servicing Lawsuit: CFPB Orders, Redress Fund & Settlements

Fay Servicing, LLC has been the subject of two Consumer Financial Protection Bureau consent orders, a Massachusetts Attorney General settlement, and a run of private lawsuits over illegal foreclosure practices, mortgage insurance overcharges, and inflated late fees. The most recent federal action, resolved in July 2025, set aside $3 million in redress for affected borrowers, and that money is still being distributed. If you had a mortgage serviced by Fay, this is what the lawsuits found and how to check whether you are owed a payment.

How to Claim Money From the CFPB Redress Fund

The CFPB’s 2024 order against Fay Servicing required the company to pay $3 million into a consumer redress fund. Distribution is being handled by Rust Consulting and, as of March 2026, remained ongoing.¹

Borrowers with questions about eligibility or the status of a payment can reach the administrator three ways:

Phone: 1-800-804-3454
Email: fayservicing_info@rustcfpbconsumerprotection.org
Mail: CFPB v Fay Servicing Third Party Administrator, PO Box 2561, Faribault, MN 55021-9561

You do not need to have filed a lawsuit to receive money from this fund. Eligibility was determined by the CFPB based on Fay’s servicing records for the conduct covered in the 2024 order.²

The 2024 CFPB Consent Order

On August 21, 2024, the CFPB issued a consent order finding that Fay Servicing had violated its earlier 2017 order along with four federal laws: the Real Estate Settlement Procedures Act, the Truth in Lending Act, the Homeowners Protection Act, and the Consumer Financial Protection Act.²

The findings fell into three main areas:

Foreclosures Against Borrowers Seeking Help

Fay continued to take foreclosure actions against borrowers who had submitted loss-mitigation applications and were entitled to protections under federal servicing rules. The company failed to place timely holds on foreclosure proceedings while borrowers were under review. When borrowers stated a preference for a particular kind of assistance, Fay did not warn them that stating a preference could mean the company would not evaluate them for other options they might have qualified for.³

Private Mortgage Insurance Overcharges

Fay failed to terminate borrower-paid PMI on time as required by the Homeowners Protection Act. In some cases the company kept disbursing PMI premiums from borrowers’ escrow accounts more than 30 days after the legal termination date. It also disbursed premiums on loans that carried lender-paid PMI, where the borrower owed nothing, and failed to refund unearned premiums within the required 45-day window. The CFPB attributed the problems to inaccurate data in Fay’s servicing system and wrong PMI termination dates on modified loans.³

Late Fees Above the Note Amount

Fay assessed and collected late fees that exceeded what borrowers’ promissory notes actually allowed. The CFPB again pointed to incorrect information in the servicing system as the cause.³

Penalties and CEO Pay Clawback

The order required Fay to pay $3 million in consumer redress, a $2 million civil money penalty, and to invest at least $2 million in upgrading its servicing technology and compliance systems.² An unusual provision targeted CEO Edward Fay personally, tying his compensation to compliance. CFPB Director Rohit Chopra said the order would “put the CEO’s pay at risk if Fay continues to break the law.”⁴

On July 1, 2025, the CFPB terminated the 2024 order, stating that Fay had fulfilled its financial obligations and waiving any remaining allegations of noncompliance.² The redress fund itself continues to pay out.

The 2017 CFPB Consent Order

The 2024 action was not Fay’s first. On June 7, 2017, the CFPB found that Fay had moved forward with foreclosures while borrowers were actively seeking help to save their homes, failed to send required notices about loss-mitigation options, and gave borrowers deficient or inaccurate information about how to apply for foreclosure relief.⁵

The agency found, among other things, that Fay’s acknowledgment notices used vague labels like “Income Documentation” instead of naming the actual documents borrowers had to submit, and that its evaluation notices misstated borrowers’ appeal rights. Fay had also been operating under the incorrect view that federal servicing rules only applied when a borrower wanted to keep the home, leaving borrowers pursuing short sales and other non-retention options without required protections.⁶

That order required up to $1.15 million in consumer redress, halted foreclosure actions against affected borrowers, and directed Fay to correct credit bureau reporting and reach out to harmed borrowers about available options.⁵

The Massachusetts Attorney General Settlement

In August 2022, Fay Servicing settled with the Massachusetts Attorney General’s Office. The state alleged that Fay engaged in unfair and deceptive practices, including failing to assist homeowners in avoiding foreclosure as required by state law, charging large upfront “good faith down payments” for loan modifications without conducting affordability analyses, failing to provide timely modification reviews, and harassing borrowers with debt collection calls above the state cap of two per week.⁷

The settlement, filed as an assurance of discontinuance in Suffolk Superior Court, provided $3.2 million in total relief: $2.7 million in direct borrower relief through principal forgiveness and $500,000 to the state.⁷

Private Lawsuits Against Fay Servicing

Fay has been sued by individual borrowers around the country. One case set precedent that reaches beyond Fay itself.

Lamirand v. Fay Servicing

Charles and Tracy Lamirand sued Fay after receiving periodic statements claiming they owed roughly $92,800 due in one month, with warnings of fees and foreclosure, even though a settlement agreement had them paying about $85,800 over a year. A district court dismissed the case on the theory that statements required by the Truth in Lending Act could not also be challenged under the Fair Debt Collection Practices Act. The Eleventh Circuit reversed in 2022, holding that a mortgage statement can satisfy TILA and simultaneously be a debt-collection communication subject to the FDCPA, and that TILA does not license misleading information in mandatory disclosures.⁸

Other Recent Cases

Not every case has gone against Fay. In Degasparre v. Fay Servicing (2023), the Rhode Island Supreme Court affirmed summary judgment for Fay in a challenge to a foreclosure sale, finding compliance with the statutory notice requirement.⁹ In Nguyen v. Quality Loan Service Corp. (2025), a Washington appeals court upheld nearly $12,700 in sanctions against a borrower for filing a frivolous suit.¹⁰

A New York putative class action, Ramirez v. Fay Servicing, was dismissed in April 2026 on res judicata grounds. The court held that once a foreclosure judgment is entered, the entire amount is subject to New York’s 9% statutory post-judgment interest, regardless of prior modification terms that had designated part of the balance as non-interest-bearing.¹¹ A bankruptcy case in the Middle District of North Carolina, Grissom v. Fay Servicing, settled for $16,000 in 2025 on RESPA and automatic-stay claims; the judge refused to seal the agreement.¹²

Where Fay Servicing Stands Now

Fay Servicing operates as a wholly owned subsidiary of Fay Financial, LLC, founded in 2008 to service distressed mortgages during the housing crisis. As of mid-2025 it managed roughly 189,000 loans with an unpaid principal balance of about $47 billion. After the CFPB terminated the 2024 order, Fitch Ratings revised Fay’s outlook from Negative to Stable in September 2025 and affirmed its servicing ratings.¹³

For a borrower today, the most concrete opening is the redress fund from the 2024 order. If Fay serviced your mortgage during the periods covered by that action, contact Rust Consulting at the numbers above to check on eligibility and payment status.

1
Consumer Financial Protection Bureau. Payments to Harmed Consumers: Fay Servicing
2
Consumer Financial Protection Bureau. Enforcement Action: Fay Servicing, LLC (2024)
3
Consumer Financial Protection Bureau. Fay Servicing Consent Order (2024)
4
Consumer Financial Protection Bureau. CFPB Takes Action Against Fay Servicing for Illegal Foreclosure Actions
5
Consumer Financial Protection Bureau. Enforcement Action: Fay Servicing, LLC (2017)
6
Consumer Financial Protection Bureau. Fay Servicing Consent Order (2017)
7
Mass.gov. National Mortgage Servicer to Provide $3.2 Million in Relief to Massachusetts Homeowners
8
U.S. Court of Appeals for the Eleventh Circuit. Lamirand v. Fay Servicing, LLC
9
vLex. Degasparre v. Fay Servicing, LLC
10
FindLaw. Nguyen v. Quality Loan Service Corp.
11
New York Courts. Ramirez v. Fay Servicing, LLC
12
NC Bankruptcy Expert. Grissom v. Fay Servicing: Denial of Motion to Seal Settlement Agreement
13
Fitch Ratings. Fitch Revises Fay Servicing Outlook to Stable, Affirms Ratings