NATIONAL MORTGAGE SERVICER TO PROVIDE $3.2 MILLION IN RELIEF TO
MASSACHUSETTS HOMEOWNERS IN SETTLEMENT WITH AG’S OFFICE
Fay Servicing Resolves Allegations That It Failed to Help
Homeowners Avoid Foreclosure; Engaged in Mortgage Servicing and Debt Collection
Misconduct
BOSTON – A national mortgage
servicer will provide $3.2 million in relief for Massachusetts consumers to
settle allegations that it engaged in unfair and deceptive conduct through its
mortgage servicing, debt collection, and foreclosure practices, Attorney
General Maura Healey announced.
The assurance of discontinuance, filed in Suffolk Superior Court, alleges
that Fay Servicing, LLC failed to take required steps to help homeowners avoid
foreclosure, harassed consumers with excessive debt collection calls, failed to
inform borrowers of their right to request verification of the amount of their
debt, and in some instances, unfairly charged foreclosure-related fees before
obtaining authority to foreclose.
“Mortgage servicers are required to make a good faith effort to help prevent
unnecessary foreclosures and keep Massachusetts families in their homes,” said
AG Healey. “This settlement will help put money back in the pockets of
borrowers who were harmed and ensure that this company complies with the law.”
The AG’s Office alleges that Fay Servicing violated the Massachusetts Act Preventing Unlawful and
Unnecessary Foreclosures, also known as “35B,” a law that requires
mortgage servicers to make a good faith effort to help borrowers with unfair
loan terms avoid foreclosure. This involves providing notice and opportunity
for borrowers to apply and be reviewed for loan modifications. A good faith
modification review under 35B must include, among other things, consideration
of the borrower’s ability to pay and the affordability of the modification. The
AG’s Office alleges that Fay Servicing offered loan modifications that required
borrowers to pay very large, up front “good faith down payments” which were not
subject to an affordability analysis. This practice often prevented eligible
homeowners from entering otherwise affordable loan modifications.
The AG’s Office
alleges other 35B violations by Fay Servicing including: failure to complete
timely reviews of borrowers’ loan modification applications, failure to
disclose reasons for denying a loan modification, and failure to provide borrowers
with notice of their right to present a counteroffer. Fay Servicing also did
not provide borrowers with a written assessment required by law, which provides
borrowers with the company’s calculation of the borrower’s income, debts, and
obligations, and the company’s analysis weighing foreclosure against
modification.
The AG’s Office also
found that, in some instances, Fay Servicing initiated foreclosure
processes—including charging borrowers foreclosure-related fees—before it had
authority to foreclose.
In addition, Fay Servicing employees allegedly made frequent calls to borrowers
to collect on their debts, calling multiple phone numbers and on multiple days
in a week, far in excess of the number of calls permitted by state law. Under the
AG’s Debt Collection Regulations,
creditors cannot call more than twice in a seven-day period, and must, within
five days of an initial debt collection communication, provide borrowers with
notice and opportunity to validate the amount of the debt. The AG’s Office also
alleges Fay Servicing failed to provide hundreds of borrowers with required
debt validation notices.
Under the terms of the
settlement, Fay Servicing must provide affected homeowners with $2.7 million in
direct borrower relief in the form of principal forgiveness for eligible loans.
The company will also pay $500,000 to the state and make significant changes to
its business practices in order to better assist struggling borrowers.
AG Healey remains committed to ensuring that mortgage servicers and other creditors
respect the rights of homeowners under state law. The AG’s Office has been a
national leader in securing restitution and other relief for borrowers from
banks and servicers, including HSBC, Ditech, Nationstar, Shellpoint Mortgage Servicing, Caliber Home Loans, PHH, Bayview, Seterus, and others on behalf of Massachusetts
homeowners.
This case was handled by Assistant Attorneys General Alda Chan and Mercy Cover
of the AG’s Consumer Protection Division.
