American Home Mortgage Servicing Inc. has reached a settlement with the Commonwealth of Massachusetts.
The Coppell, Texas-based servicer has agreed to significantly modify 8,200 Massachusetts mortgages, the state’s attorney general’s office announced Wednesday. Borrowers who are more than 45 days past due and unable to make their scheduled payments are eligible for modifications.
Modifications will involve interest-rate reductions, extending amortizations and — if necessary — principal forbearance.
The state will have the opportunity to object to foreclosures or modification denials. When the state and American Home are unable to resolve their differences, American Home will be required to obtain court approval to foreclose.
Delinquent borrowers who do not qualify for modifications or other workout options will be eligible for relocation payments of between $3,000 and $7,500
The loans were originated by Option One Mortgage Corp., which was shut down by parent H&R Block Inc. in December 2007.
American Home acquired Option One’s servicing business in the Spring of last year.
Massachusetts filed a lawsuit in Suffolk Superior Court in June 2008 against Option One and H&R Block alleging that the former subprime lender put borrowers in risky loans it should have known would wind up in foreclosure. In addition, the company allegedly charged several hundred dollars more in fees and points to black and Latino borrowers than similarly situated white borrowers.
The lawsuit led to a November 2008 injunction by a superior court that was upheld by the Massachusetts Appeals Court on Oct. 28.
“As a result, American Home Mortgage Servicing Inc. was named as a defendant in the office’s ongoing enforcement action, and became subject to certain obligations under a preliminary injunction issued by the Suffolk Superior Court in November 2008, which limited the defendant’s ability to foreclose on the loans originated by Option One and H&R Block Mortgage,” today’s announcement stated.
No misconduct is alleged against American Home.
But litigation against Option One and H&R Block Mortgage is expected to go to trial next year.
“The lawsuit is seeking redress for the damage incurred by homeowners and Massachusetts communities as a result of the unfair and deceptive lending practices of the defendants,” the statement said. “The lawsuit also alleges civil rights violations because the defendants’ policies and practices resulted in discriminatory pricing to the detriment of black and Hispanic borrowers; disparate pricing violates antidiscrimination laws.”
Last week, American Home filed a lawsuit in a Franklin County, Ohio, court against Ohio’s attorney general in anticipation of a lawsuit filed that same day by the state in Cuyahoga County Common Pleas Court against American Home. Ohio claims American Home forced borrowers to pay excessive fees, waive their rights and agree to modification terms that were “unconscionably one-sided.”
