A national mortgage servicing company will pay nearly $1 million to Massachusetts residents to settle allegations related to its handling of requests to modify loans and avoid foreclosure.
Kyanite Services Inc., the former corporate parent of third-party mortgage servicer Seterus Inc., will pay $975,000 in relief to approximately 180 Massachusetts borrowers “for giving them inaccurate and untimely information regarding their loan modification applications,” Attorney General Maura Healey’s office said Tuesday in a statement.
“When families struggling to pay their mortgage asked for a loan modification, this company gave them the run around,” Healey said in the statement. “This settlement provides relief for borrowers who were harmed and ensures the company answers for its abusive conduct.”
Seterus is no longer in business. Kyanite sold Seterus in 2019 to Nationstar Mortgage, which operates as Mr. Cooper.
The AG’s office alleged that Seterus violated a Massachusetts law known as “35B,” the Massachusetts Act Preventing Unlawful and Unnecessary Foreclosures. The law was passed in 2012 and requires creditors to take reasonable steps and make a good faith effort to avoid foreclosing on certain mortgage loans.
The AG’s office also alleged 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 said it began investigating Seterus after receiving complaints from Massachusetts consumers who said they had experienced significant problems applying for loan modifications.
The investigation found that Seterus routinely sent borrowers notices that their loan modification applications were complete and later notified them that additional documents were needed, according to the statement. This cycle often repeated multiple times, the AG’s office said, causing the application process to take years instead of months; in some cases they were not 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,” the AG’s office said. “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 investigation also found that when borrowers’ applications were complete or missing only certain items, Seterus mailed notices advising borrowers to submit 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 AG’s office said.
The AG’s office said its investigation also found that Seterus didn’t provide borrowers with a written assessment as required by law, giving Seterus’s calculation of the borrower’s income, debts and obligations and the net present value analysis of foreclosure versus modification.
The Consumer Financial Protection Bureaus in December announced that it had issued a consent order against Seterus and Kyanite to address “widespread failures in Seterus’s handling and processing of struggling homeowners’ applications for loss mitigation options.” The CFPB’s agreement provided for nearly $5 million in payments to almost 12,000 borrowers and a $500,000 civil penalty.
