Many residents of Tennessee suffer from financial difficulties have attempted to modify their home mortgages to forestall both foreclosure and Chapter 7 bankruptcy. Unfortunately, some firms offering mortgage modification services attempted to take advantage of persons who see mortgage modification as a pathway to financial health. A recent settlement between Massachusetts and a large non-bank lender shows some of the abuses that borrowers may face.
According to a statement released by the Massachusetts Attorney General, the firm, formerly named Northstar, and now known as Mr. Cooper, has agreed to settle the state's claims against it by submitting to various penalties. Nationstar is alleged to have violated the Massachusetts law intended to prevent lenders from using certain deceptive practices.
One such technique was the offering of a short-term, interest-only modifications without taking into account the borrower's ability to repay the debt over the life of the modified loan. After two years of interest only payments, the payments ballooned into amounts higher than the debtors were paying when they initially defaulted. Nationstar is also accused of failing to process mortgage modification applications in good faith. Instead, borrowers ran into lengthy delays caused by Nationstar employees mishandling the application papers.
According to the settlement agreement, the servicing company will be required to offer its clients meaningful mortgage modification agreement that, according to the Attorney General's office, will provide "millions" in borrower relief by reducing the principal on their mortgages. Nationstar also agreed to pay $500,000 in restitution to borrowers whose home were foreclosed.
Even though this case occurred in Massachusetts, the reported abuses can occur almost anywhere. Anyone who is facing similar problems with a mortgage modification may wish to consult an attorney who is experienced in handling bankruptcies and foreclosure proceedings for advice loan restructuring and the legal consequences of altering the terms of a mortgage agreement.
Source: HousingWire, "Massachusetts hits Nationstar (aka Mr. Cooper) with fine, sanctions over servicing abuses," Ben Lane, Jan. 30, 2018