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Ohio Sues Over New Century Loans

Ohio Sues Over New Century LoansOhio AG announces lawsuit against Carrington Mortgage

August 3, 2009

By MortgageDaily.com staff

The state of Ohio claims in a new lawsuit that the acquirer of servicing operations from New Century Financial Corp.’s bankruptcy reneged on a promise to provide modifications and workout options to borrowers.

The lawsuit was filed Friday in the Court of Common Pleas, Franklin County, Ohio, by the state’s attorney general and the Ohio Department of Commerce, according to a copy of the complaint provided by the state.

Named as defendant is Carrington Mortgage Services LLC.

The state claims Carrington failed to adhere to a January 2008 agreement to offer reasonable loan modifications to eligible borrowers. The agreement resolved litigation with New Century Financial Corp., which collapsed into bankruptcy in 2007 with Carrington and parent Carrington Capital Management LLC acquiring its loan servicing operations out of bankruptcy.

Ohio said Carrington’s agreement entitled borrowers to reasonable loan workouts, forbearance restructuring agreements or other resolutions.

But the second-mortgage servicer didn’t provide borrowers with workout terms reasonably designed to avoid foreclosure, the state said. Carrington also failed to provide a written copy of the terms to the state and didn’t give the state the proposed borrower terms within the 21 days required by the agreement.

The Santa Ana, Calif.-based company is also accused of violating Ohio’s Consumer Sales Practices Act because its customer service is “incompetent, inadequate and inefficient” and it neglected to investigate and resolve consumer complaints in a timely manner. It also pressured borrowers into signing unfair, unreasonable and one-sided loan modification documents.

“We’ve tried to work with them,” Ohio Attorney General Richard Cordray said in a statement, “but now we must take action.”

Carrington’s servicing portfolio was 86,400 loans for more than $16 billion as of June 30, 2008. The servicer acquired $1.9 billion in mortgage servicing rights from Fremont Investment & Loan in April 2008.

An affiliate of the company was sued by American Home Mortgage Servicing Inc. earlier this year. American Home claims Carrington, which invested in the lowest tranches of subprime residential mortgage-backed securities, devised an illegal scheme that allegedly enabled it to divert losses to more senior investors.

Ohio is calling for restitution, civil penalties and damages that resulted from breeching the agreement.

State of Ohio, ex rel. Richard Cordray Attorney General of Ohio, 30 Broad Street, 14th Floor Columbus, Ohio 43215, Ohio Department of commerce, ex rel. Kimberly A. Zurz, Director, 77 S. High Street, 23rd Floor, Columbus, Ohio, 43266, Plaintiffs, v. Carrington Mortgage Services, LLC, C/O Ct Corporation System, Statutory Agent, 1300 E. 9th Street, Cleveland, Ohio 44114, Defendant.
Case No. 09 CVH 7 11433, July 31, 2009 (Court of Common Pleas, Franklin County, Ohio)

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