Consumer complaint received 2019-03-30
Company: GMFS, LLC
State: LA
Product: Mortgage
Sub-product: FHA mortgage
Issue: Closing on a mortgage

Complaint:
On XX/XX/XXXX, an FHA Insured house that was sold in a Pre Foreclosure Sale accepted by GMFS Mortgage Company. The house was sold " as-is '' due to Surchargeable flood damage as defined by FHA. Although the legal closing disclosure used by the closing agent, Attorney XXXX XXXX. is a HUD-1 Settlement Statement, flood insurance claim funds in the amount of {$81000.00} that were being held in a restricted escrow account for the borrowers were not disclosed on this document. However, the mortgage company has claimed to apply those funds to eliminate outstanding debt after the application of the PFS sales proceeds which legally satisfy all outstanding debt if full. 


Although my initial attempts to deal with this issue with the mortgage company focused on FHA Non-compliance for how they justified keeping the funds towards indebtedness that legally no longer exists, I now recognize how not having this transaction disclosed on the HUD-1 Settlement Statement is the key issue that keeps the money hidden from FHA compliance reviews. The concern for fraud is further increased as this also creates the appearance of us corroborating the absence of the money by signing the settle statement to the best of our knowledge as well as if we had accepted their multiple attempts to convince us that we voluntarily agreed to forfeit or relinquish the funds although we knowingly did not and have maintained our efforts for since XX/XX/XXXX to have the {$81000.00} that is rightfully ours released to us. 


In addition to this non-compliance of closing disclosure in our PFS, there are several other concerns we have come to understand through further research of the FHA Handbook that are not compliant with FHA or other federal policies including : 1 ) inaccurate figures on our 1098 and 1099-C federal tax documents that have complicated the timely filing of our XXXX income taxes because the mortgage company has claimed they would only address the issues with " qualified '' written requests as if my previous phone calls and emails to them did not warrant their attention to the matter of potential errors on federal tax documents that they prepared. 
2 ) unnecessary delay in our initial application for mortgage relief options that originally began XX/XX/XXXX under a previous servicer and which we believe has been intentionally muddled given our situation of both the financial hardship due to reduction of income that began in XX/XX/XXXX and the natural disaster hardship that subsequently occurred XX/XX/XXXX. 
3 ) confusion regarding necessary measures to protect the mortgagees interest in the property or prevent insurance fraud by homeowners after the flood that did not contradict their FHA required assistance to help borrowers recover from disasters as their responsibility for Surchargeable damage to properties in the case of defaults. 
4 ) the wrongful filing of a foreclosure lawsuit in XX/XX/XXXX and initiation of Sheriffs seizure and sale although we had accepted the contingent approval to participate in a PFS  and engaged a real estate agent on XX/XX/XXXX which we were told would pause and/or prevent further foreclosure activities ; as well as a motion to appoint curator to locate and notify us of legal foreclosure action on XX/XX/XXXX although we were in ongoing contact with the mortgage company for the current PFS. 


The additional steps I have taken the resolve this issue since XX/XX/XXXX include : 1 )  Phone and email correspondence with GMFS executives and multiple and repeated phone transfers between departments of XXXX XXXX XXXX such as Executive Services, Customer Service, Loss Draft, Loss Mitigation, Retention, Short Sale, Short Sale Liquidation, High Risk Resolution, Consumer Escalations, and Customer Resolution. 
2 ) A complaint filed with the Louisiana Office of Financial Institutions on XX/XX/XXXX who concluded that the have to defer final determination of FHA compliance to the HUD OIG ; although they simultaneously stated an opinion in agreement with GMFS 's justification that could presumably deflate the confidence of our complaint for non-compliance on GMFS 's part. 
3 ) Calls to the HUD National Servicing Center ( on XX/XX/XXXX and again on XX/XX/XXXX ) as well as the FHA Resource Center ( on XX/XX/XXXX ). I then submitted a hotline report for suspected fraud with the HUD OIG on XX/XX/XXXX which was given a ticket # XXXX. HUD has not concluded whether or not GMFS was non-compliant in this matter although I was advised that a different agency would have to handle the matter including either FEMA because they issued the flood insurance funds ( although FHA Handbook policies determine how a mortgage handles insurance funds regardless of the insurance company or agency ) and the CFPB because RESPA covers the escrow matter ( although this is not the closing disclosure/servicing of an escrow account to pay taxes or insurance premiums from ongoing mortgage payments but it is the dispute over the application of insurance funds held in escrow according to FHA policies after a PFS closing pays the account in full ). 
4 ) Inquiries to the closing agent about this matter including : ( a ) the day of the closing when I expressing confusion and frustration with the mortgage company handling the funds although to the best of my knowledge, I did not know they should have been disclosed on the settlement statement ; ( b ) emails in XX/XX/XXXX seeking advice and clarification of their representation of our interest in possible civil litigation or criminal investigation of the mortgage company ; ( c ) follow-up on the public filing of legal documents regarding the cancellation of the mortgage and a motion by GMFSs attorneys to withdraw the foreclosure and sheriff sale seizure ; and ( d ) a direct inquiry to address the inaccurate HUD-1 Settlement Statement approved by his office that does not disclose the transaction of the mortgage company applying held insurance funds to debt that no longer legally exists by the terms of the PFS paying it in full. 
5 ) On XX/XX/XXXX, I submitted a follow-up hotline report to the HUD OIG with clarification and emphasis on the non-compliant HUD-1 Settlement Statement as the alleged fraudulent document that enables the mortgage company to possibly hide its action from a HUD compliance review of our FHA mortgage. Having heard no response as of XX/XX/XXXX, I have prepared this complaint to the CFPB.

Company public response: Company believes it acted appropriately as authorized by contract or law
Company response to consumer: Closed with explanation