In a September 26 settlement, the Massachusetts Attorney General’s office reached an agreement with a mortgage loan servicer to resolve allegations of violations of Massachusetts consumer protection laws and the Truth in Lending Act.
The loan servicer primarily engaged in the servicing of nonperforming residential mortgage loans. The Massachusetts AG alleged that it failed to comply with state foreclosure law by failing to timely provide required notices to borrowers that allowed large unpaid balances to accrue. When the servicer did provide the notices, it unlawfully charged up-front payments for mortgage modifications. The loan servicer also improperly collected or attempted to collect, time-barred debts without necessary disclosures, excessively contacted borrowers in violation of state regulations, and failed to send required periodic statements to borrowers in violation of TILA.
As part of the settlement, the loan servicer agreed to pay Massachusetts $300,000, which may be utilized for consumer restitution. Importantly, the company must release all liens associated with the underlying portfolio at issue at no expense to the consumer, request the deletion of related tradelines from credit reports, and is prohibited from undertaking any further collection activity on the accounts. For future accounts, the loan servicer has agreed not to engage in collection activities on time-barred debts and to comply with applicable laws and regulations, including assigning a single point of contact to all delinquent borrowers to facilitate communication and clarify processes and deadlines.
Putting It Into Practice: This settlement underscores regulators’ commitment to enforcing mortgage borrower protections (previously discussed here, here, and here) and highlights the importance of clear, timely communication with borrowers, particularly those at risk of defaulting on their loans. Mortgage servicers should prioritize compliance and borrower communication in these instances.