Mass AG Reaches Agreement w/ Servicer To Provide Affordable Loan Mods To Qualified Borrowers, Up To $7.5K Relocation Expenses To Ineligible Homeowners

From the Office of the Massachusetts Attorney General:

• [A]ttorney General Martha Coakley’s Office announced that it has entered into an agreement with Texas-based American Home Mortgage Servicing, Inc. (“AHMSI”) that will provide significant benefits to approximately 8,200 Massachusetts borrowers holding loans originated by Option One Mortgage Corp. (“Option One”) and H&R Block Mortgage Corp. (“H&R Block Mortgage”). Those mortgage loans are the subject of a lawsuit which the Attorney General’s Office filed in June 2008. The complaint alleges Option One and H&R Block Mortgage originated the risky subprime loans with reckless disregard for whether borrowers would be able to afford their loan payments – a practice that has contributed significantly to the foreclosure crisis in Massachusetts. Under the agreement, [...] AHMSI will be required to provide affordable loan modifications to certain borrowers who fall behind in their mortgage payments.(1)

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• The agreement is designed to remedy unfair and deceptive conduct by Option One and H&R Block Mortgage that was highlighted by the Superior Court in the injunction issued in November 2008. The injunction prohibits the defendants from initiating or advancing foreclosures on loans that are “presumptively unfair,” because they predictably led to default or foreclosure. That preliminary injunction was affirmed by the Massachusetts Appeals Court on October 28, 2009. The Attorney General’s litigation with Option One, H&R Block Mortgage, Block Financial Corp., and their parent company, H&R Block, Inc., is ongoing, and is expected to go to trial in 2010.(2)

For the entire Massachusetts AG press release, see Attorney General Coakley’s Office Reaches Affordable Loan Modification and Foreclosure Prevention Agreement with Mortgage Servicer (Purchaser Will Provide Affordable Loan Modifications to 8,000 borrowers).

(1) For delinquent borrowers who do not qualify for loan modifications, relocation payments of $3,000 to $7,500 and alternatives to foreclosure, such as deeds-in-lieu of foreclosure will be offered. The Attorney General’s lawsuit did not allege loan origination misconduct by AHMSI, and the company cooperated with the Attorney General in reaching this agreement.

(2) 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 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.