Texas-based Fay Servicing LLC has agreed to settle with the Massachusetts attorney general’s office over allegations that the national mortgage servicer engaged in unfair and deceptive conduct with borrowers.
Fay Servicing has agreed to a $3.2 million settlement related to its mortgage servicing, debt collection and foreclosure practices, the attorney general’s office said in a statement yesterday.
An investigation by the Attorney General Maura Healey’s office alleged that Fay Servicing violated parts of the Massachusetts law known as 35B, which requires mortgage servicers to make a good-faith effort to help borrowers avoid foreclosure, including taking into consideration the borrower’s ability to pay and the affordability of loan modifications.
The attorney general’s office alleged that Fay Servicing did not take steps required to help homeowners avoid foreclosure, exceeded the number of debt collection calls allowed by the state and did not inform borrowers of their right to request verification of the amount of their debt. The attorney general’s office also found instances where Fay Servicing 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,” Healey said in a statement. “This settlement will help put money back in the pockets of borrowers who were harmed and ensure that this company complies with the law.”
Under the terms of the settlement, Fay Servicing will provide affected homeowners with $2.7 million in direct borrower relief by forgiving the principal of eligible loans. The company will also pay $500,000 to the state and change its business practices to better assist struggling borrowers, the statement said.
Allegations against Fay Servicing include offering loan modifications that required borrowers to pay down payments up front without going through an affordability analysis, which prevented eligible homeowners from entering into otherwise affordable loan modifications, the statement said.
Other allegations include failing to complete a timely reviews of borrowers’ loan modification applications, not disclosing reasons for denying a loan modification and failing to notify borrowers of their right to present a counteroffer.
