A national mortgage servicing company will provide $4 million in relief for Massachusetts residents to settle allegations that it failed to help homeowners avoid foreclosure.

In the assurance of discontinuance, filed in Suffolk Superior Court, New Penn Financial LLC, doing business as Shellpoint Mortgage Servicing, will provide millions in relief to borrowers in the form of reductions on the principal balances of their loans and waive shortfalls when borrowers sell their homes for less than what they owe. Shellpoint will also change their practices to better assist struggling homeowners going forward.

“This settlement will put money back into the pockets of homeowners who were harmed and will ensure Shellpoint amends its practices and complies with the law,” Attorney General Maura Healey said in a statement. “We are committed to making sure Massachusetts residents are able to stay in their homes, particularly when their mortgages and loans have been mishandled by companies like this one.”

“Many thanks to Attorney General Maura Healey and her office for negotiating this settlement agreement,” Marty Jones, interim CEO of Roxbury-based community development corporation Urban Edge, said in a statement. “The changes that this settlement will bring will help vulnerable families in our neighborhood seeking to stay in their homes.”

The AG’s Office alleges that the company violated the Massachusetts Act Preventing Unlawful and Unnecessary Foreclosures – known as “35B” – a landmark law passed in 2012 that protects certain borrowers from foreclosure. The law requires creditors to make a good faith effort to avoid foreclosure for borrowers whose mortgage loans have unfair subprime terms. The AG’s Office also alleges that Shellpoint violated the Massachusetts Consumer Protection Act.

Under the terms of the settlement, Shellpoint is required to provide a total of $3.5 million in principal reduction through a loan modification program and waiving shortfalls when borrowers sell their homes for less than they owe. Shellpoint will also make a $450,000 payment to the commonwealth.

The AG’s Office began an investigation into Shellpoint after receiving complaints from Massachusetts consumers indicating they experienced significant problems getting through to Shellpoint representatives and applying for loan modifications such that they were at an unfair risk of foreclosure.

The investigation revealed that Shellpoint failed to ensure a single point of contact for borrowers; that it mishandled calls from borrowers with limited English language capacity; that it created unnecessary difficulties for homeowners after a divorce or the death of a co-borrower; and that it mishandled mortgage loans transferred from other servicing companies. The AG’s Office also found that Shellpoint did not provide a timely and efficient loan modification review for eligible borrowers, as required by Section 35B. Shellpoint agreed to make major business practice changes to address these deficiencies and was responsive to the AG’s Office during the course of the investigation.

Mortgage Servicer to Pay $4M to Settle Claims it Failed to Help Avoid Foreclosures

by Banker & Tradesman time to read: 2 min