| Attorney General Maura Healey has secured millions of dollars in relief for hundreds of Massachusetts residents in a settlement with a national mortgage servicer over its failure to help homeowners avoid foreclosure.
Nationstar Mortgage will provide direct payments and loan modifications to hundreds of homeowners in Massachusetts, pursuant to an assurance of discontinuance filed in Suffolk Superior Court. The company will also update its practices and be subject to compliance oversight from the AG’s Office.
“In Massachusetts, mortgage servicers are required by law to help prevent unnecessary foreclosures and keep families in their homes,” Healey said in a statement. “Nationstar failed to stop foreclosures and this settlement gives homeowners in the hardest hit areas in Massachusetts a chance to stay in their homes. It also sends a clear message that we will hold accountable companies that are not following the law.”
The AG’s Office alleges that the company violated the Massachusetts Act Preventing Unlawful and Unnecessary Foreclosures, known as “35B,” a landmark law passed in 2012 that protects certain borrowers from foreclosure. The law requires creditors to make a good faith effort to avoid foreclosure for borrowers whose mortgage loans have unfair subprime terms.
Under the terms of the settlement, Nationstar is required to implement a loan modification program that will provide millions in borrower relief in the form of principal reductions, pay $500,000 in restitution to certain foreclosed-upon borrowers, and provide the loan modification review protections required by state law for borrowers who fall into default in the future.
At least 500 to 600 Massachusetts residents are eligible for loan modification review under the terms of the settlement and more than 100 foreclosed-upon borrowers will be eligible for restitution. Borrowers eligible for restitution will be contacted about how to apply for payments.
Nationstar is the largest non-bank mortgage servicer in the country. The AG’s Office began an investigation into Nationstar after receiving hundreds of complaints from Massachusetts consumers.
According to the AG’s Office, Nationstar allegedly offered unfair and deceptive short-term, interest-only loan modifications to borrowers that did not consider the borrower’s ability to repay the mortgage debt over the life of the modified loan. After one or two years, the monthly payments on those modifications ballooned to an amount higher than on which the borrower originally defaulted. The AG’s Office alleges that this loan modification program set borrowers up to fail and put them at heightened risk of foreclosure.
The AG’s Office also alleges that Nationstar failed to provide a fair opportunity for a modification review. When borrowers filled out and returned the necessary forms, Nationstar failed to log, track and process those forms as required by the law. Instead, borrowers faced massive delays, repetitive requests for modification paperwork and were often denied loan modifications on the grounds that they had failed to submit proper documentation, which had indeed been submitted.
