AG HEALEY SECURES NEARLY $1 MILLION FOR HOMEOWNERS FROM COMPANY THAT MISHANDLED LOAN MODIFICATIONS

AG HEALEY SECURES NEARLY $1 MILLION FOR HOMEOWNERS FROM COMPANY THAT MISHANDLED LOAN MODIFICATIONS 

BOSTON — A national mortgage servicing company will provide nearly $1 million in relief for Massachusetts residents to settle allegations that it impeded homeowners attempting to obtain loan modifications to avoid foreclosure, Attorney General Maura Healey announced today.

In the assurance of discontinuance filed in Suffolk Superior Court, Kyanite Services, Inc., the former corporate parent of third-party mortgage servicer Seterus, Inc., will provide $975,000 in relief to approximately 180 Massachusetts borrowers for giving them inaccurate and untimely information regarding their loan modification applications. Seterus is no longer in business.

“When families struggling to pay their mortgage asked for a loan modification, this company gave them the run around,” said AG Healey. “This settlement provides relief for borrowers who were harmed and ensures the company answers for its abusive conduct.”

The AG’s Office alleges that Seterus violated the Massachusetts Act Preventing Unlawful and Unnecessary Foreclosures – known as “35B” – a landmark law passed in 2012 that requires creditors to take reasonable steps and make a good faith effort to avoid foreclosing on certain mortgage loans. The AG’s Office also alleges that Seterus violated the Massachusetts Consumer Protection Act by providing borrowers with false and deceptive information about the status of their loan modification applications.

The AG’s Office began an investigation into Seterus after receiving complaints from Massachusetts consumers indicating they experienced significant problems applying for loan modifications.

The investigation found that Seterus routinely sent borrowers notices that their loan modification applications were complete only to later notify them that additional documents were needed. This cycle often repeated multiple times, causing the application process to take years instead of months, if completed at all. Even though it sometimes took Seterus close to a month to identify missing documents, Seterus then gave the borrowers only eight days to submit the additional items before denying the borrowers’ requests as incomplete. In some cases, Seterus notified borrowers they had more time but then denied those borrowers before the expiration of the deadline listed in Seterus’ written notice. 

The AG’s investigation also found that during these periods when the borrowers’ applications were complete or only missing certain items, Seterus mailed borrowers notices advising borrowers to submit entirely new applications or to apply for a short sale or deed-in-lieu of foreclosure. These solicitations falsely blamed the borrowers for not working with Seterus, when Seterus’s own practices were causing significant delays and frustration in the loan modification review process. 

            The investigation also revealed that some borrowers returned the Mortgage Modification Options (MMO) asking for a modification and experienced the same delays and denials. In addition, Seterus didn’t provide borrowers with the written assessment as required by law. The requirement of a written assessment is critical to provide the borrower with Seterus’s calculation of the borrower’s income, debts and obligations and the net present value analysis of foreclosure versus modification.

            In 2019, Kyanite sold Seterus to Nationstar Mortgage, (d/b/a as Mr. Cooper). In a settlement with the AG’s Office, Nationstar previously agreed to implement its own 35B compliant loan modification program.

The Seterus case is part of the AG’s Office’s investigation of the mortgage servicing industry and its compliance with the Act Preventing Unlawful and Unnecessary Foreclosures. AG Healey is committed to ensuring that all mortgage servicers respect the rights of homeowners under this important state law.

The AG’s Office has been a national leader in securing restitution and other relief for borrowers from banks and servicers. The office has obtained recoveries and other relief from Morgan Stanley, Goldman Sachs, Royal Bank of Scotland, Citigroup, JPMorgan Chase, Countrywide, Fremont Investment & Loan, Option One, HSBC, Ditech, Shellpoint Mortgage Servicing, Caliber Home Loans, PHH and others on behalf of Massachusetts homeowners.

Consumers with questions or concerns about deceptive or abusive foreclosure and loan servicing practices can call the Attorney General’s consumer hotline at 617-727-8400 or file a complaint with the office.

This matter was handled by Assistant Attorney General Michael Lecaroz, of the AG Healey’s Consumer Protection Division, with assistance from Assistant Attorney General Andrew Haile, currently of the AG’s Administrative Law Division.