On April 9, 2019, the Massachusetts Attorney General’s office announced that a national mortgage servicing company agreed to pay $2 million and undertake affordable loan modifications to resolve allegations that the company failed to help borrowers avoid foreclosure by giving homeowners unaffordable loan modifications and “ballooning” monthly payments.
Massachusetts alleged that certain modified payments started off lower than the original payments, simply because they only covered monthly interest, but then they slowly ballooned to amounts higher than borrowers’ original, unaffordable payments after a few years. Additionally, the state claimed that the company used short-term, interest-only loan modifications even when more affordable options were available and also “routinely gave borrowers the runaround about missing documents required for the loan modification review process.” These acts and more allegedly violated the Massachusetts Act Preventing Unlawful and Unnecessary Foreclosures—also known as “35B”—which requires creditors to make a good faith effort to avoid foreclosure for borrowers whose mortgage loans have unfair subprime terms.
In addition to the $2 million payment, the settlement requires the company to provide loan modification relief to Massachusetts borrowers who applied for modifications and were foreclosed upon due in part to the company’s alleged conduct. The company must also “institute a new loan modification program” and “review Massachusetts borrowers currently on interest-only or short-term modifications to provide them a more sustainable, affordable modification.”
This settlement is the latest in the Massachusetts Attorney General’s officer’s recent actions against banks and servicers. We have previously covered a similar settlement here.