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American Home v. Ohio AG v. American Home

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American Home Mortgage Servicing Inc. and Ohio Attorney General Richard Cordray are suing each other allegations of poor servicing practices.

A complaint was filed in a Franklin County, Ohio, court today against Ohio’s attorney general by the Coppell, Texas-based servicer.

American Home claims the state made unsupported allegations about its alleged servicing practices in a letter from Cordray’s office.

The letter was followed by a lawsuit filed today by Ohio in Cuyahoga County Common Pleas Court against American Home. A permanent injunction is sought.

“The lawsuit alleges numerous violations of the Ohio Consumer Sales Practices Act including but not limited to: incompetent and inadequate customer service, failure to respond to requests for assistance, failure to offer timely or affordable loss mitigation options to borrowers and unfair and deceptive loan modification terms,” a statement today from the attorney general said.

Cordray claims the company used modification agreements that forced borrowers to pay excessive fees, waive their rights and agree to modification terms that were “unconscionably one-sided.”

Modifications in the state by American Home since October 2008 exceeded 2,300 — including 173 under the Home Affordable Modification Program, the company’s news release indicated.

American Home, the mortgage servicing arm of billionaire Wilbur Ross’s empire, claims Cordray’s comments are contradicted by positive feedback numerous state and non-profit agencies.

“American Home Mortgage Servicing Inc.’s management was dismayed when it received a letter last week from the Ohio attorney general’s office threatening to sue American Home Mortgage Servicing Inc. for unfair servicing practices,” said Chief Legal Officer Jordan Dorchuck in the statement. “We offered to meet with representatives of the attorney general in an attempt to resolve any issues they may have regarding our servicing practices.”

But Cordray reportedly declined any further discussion and filed his lawsuit.

American Home hopes that its strategy to fight the state as plaintiff rather than a defendant will enable it to convince the courts to declare that its practices are completely compliant with Ohio laws.

The distressed asset servicer noted that it has grown from 300 employees when it was founded in April 2008 to more than 3,000. Its servicing portfolio is composed of 500,000 loans, including 3,000 in Ohio.

The attorney general highlighted a lawsuit filed in August against Carrington Mortgage Services LLC, which has reportedly led to a voluntary 60-day moratorium on home foreclosures.

“The acts of some mortgage servicers have gone beyond the point of being negligent — they have become predatory financial practices and in Ohio, they won’t be tolerated,” Cordray concluded.

Ironically, Carrington affiliates were sued by American Home in March.

State of Ohio, ex rel. Richard Cordray Attorney General of Ohio 615 W. Superior Ave., 11th Floor Cleveland, Ohio 44113-1899 Plaintiff, v. American Home Mortgage Servicing Inc. c/o Statutory Agent CT Corporation System 1300 E. 9th St. Cleveland, OH 44114.

Case. No. CV 09 708888, Nov. 5, 2009 (In the Court of Common Pleas Cuyahoga County, Ohio)

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