A lawsuit filed by the Texas attorney general alleges violations of the state’s mortgage servicing laws by American Home Mortgage Servicing Inc. Borrowers were allegedly charged for late fees, insurance and taxes even though they didn’t owe such expenses.
The lawsuit was filed today in the District Court of El Paso County Texas by Texas Attorney General Greg Abbott, according to a copy of the complaint released by the state. The company is accused of multiple violations of the Texas Debt Collection Act — which American Home is subject to as a home mortgage servicer — and the Texas Deceptive Trade Practices Act.
The Coppell, Texas-based servicer allegedly was too aggressive and used “unlawful tactics” in its collection practices with borrowers who had trouble meeting their payment obligations. Several calls were made on the same day to consumers, according to the lawsuit.
Abbott also claims borrowers who made payments on time weren’t properly credited, and agents of the company lied to borrowers about missing payments so “profitable” late fees or escrow accounts could be justified. Forced-placed insurance was allegedly imposed even though borrowers already had insurance policies in force, and taxes were paid even though borrowers had paid the taxes.
The suit says American Home refused to accept payments when the payment amount wouldn’t cure the default. The practice caused unnecessary late charges and false reporting to the credit bureaus.
In some cases, American Home agents allegedly withdrew funds from borrowers’ accounts and the accounts were never credited.
The scheme used violations of state law to declare default and trigger “obligation owed to investors under its agreements with them to initiate and conduct foreclosure of the homes,” according to the state.
“Because of the defendant’s unlawful conduct, homeowners defaulted on their loans, leading to foreclosure proceedings,” an announcement says.
Texas claims that the servicer’s home-retention team were of no help in stopping the foreclosure process. Documents required for loan modifications were mysteriously lost, and by the time the documents were located — they were outdated and needed to be replaced by more current documents. In some cases, the monthly payments of modified loans actually increased.
The state seeks penalties of up to $20,000 per violation.
American Home didn’t immediately respond to a request for a statement.
State of Texas, Plaintiff v. American Home Mortgage Servicing Inc. Defendant.
Cause No. 2010-3307, Aug. 30, 2010 (District Court of El Paso County Texas).
