High Noon in Ohio – Attorney General and American Home Mortgage Servicing Inc. Square off Against Each Other
On November 5, 2009 the gloves came off in the state of Ohio. At stake is how much control can a state have over the way a mortgage company modifies loans for people facing foreclosure in that state.
Up until now mortgage companies have run their loan modification programs without any monitoring from state and federal offices. In some instances the modifications they have offered have been on their terms. They have given very little consideration to the people to whom these have been offered. They have also paid little attention to the state or federal governments.
On one side there is Ohio’s Attorney General. He filed a suit against American Home Mortgage Servicing, Inc. (AHMSI). The suit alleges that the company violated Ohio’s consumer protection laws. His suit deals with how AHMSI is handling the cases of people whose loans they are servicing and who have requested loan modifications. He asserts that the company violated the law by
- Ignoring the requests of people facing foreclosure for loan modifications,
- Having incompetent and inadequate customer service,
- Failing to modify loans in a timely manner, and
- Offering unfair and deceptive terms on loans that it did modify.
The Attorney General’s office indicated that they had received complaints from 119 residents of Ohio facing foreclosure about the way AHMSI treated them when they asked for help to save their homes.
In this suit the Attorney General seeks a permanent injunction against AHMSI continuing these practices. He also asks penalties to be assessed. He also requests that the court order the company to put in place processes designed to provide efficient, competent and adequate customer service for all of the Ohio residents whose loans its services.
On the other side is American Home Mortgage Servicing Inc. This is not a mortgage company. It is a servicer. It originally was the servicing arm of American Home Mortgage. When that company went bankrupt in 2007, American Home Mortgage Servicing Inc. was sold to Wilber Ross & Co LLC. The company services the loans kept by American Home Mortgage. They also have become the second largest servicer of subprime loans in the United States. They took over the servicing of the loans of Option One when that company went bankrupt. They purchased the servicing rights on some subprime loans from Citi Residential. In 2009 they started servicing some loans of the bankrupt Taylor, Bean and Whitaker that they purchased from Wells Fargo.
At the same time the lawsuit was filed by the Attorney General in Ohio, AHMSI filed a counter suit against the Attorney General. They asked the court to declare that the way they handle loan modifications and the service they offer to people seeking loan modifications are in line with the law in Ohio. When they filed their suit, the company sent out a press release. Here are some of their comments from that release:
- They have a large staff in place and have high customer service standards.
- Their customer service representatives work closely with people who contact them to resolve questions, concerns and complaints they have.
- They have worked closely with people from Ohio who have contacted them about loan modifications.
- Since joining the Making Home Affordable Loan Modification Program in July of 2009, they have sent letters to every Ohio resident behind on their loan payments and eligible for a potential modification under this program inviting them to apply for a modification.
- Prior to joining the Making Home Affordable Modification Program they had developed their own loan modification program to assist those who were facing foreclosure.
- Representatives of their company have participated in Outreach events held in Ohio at which they have met face to face with people whose loans they serviced and were facing foreclosure.
- Since October of 2008 the company modified the loans of 2,200 people in Ohio under their own program. There were an additional 173 people who currently have trial loan modifications under the Making Home Affordable Modification Program.
In the press release they also commented on their nationwide effort to help people facing foreclosure save their homes. They said that from October 1, 2008 to September 30, 2009 they have offered more than 67,000 loan modifications to people whose loans they service. These were outside of the Making Home Affordable Modification Program. This was greater than 15% of all of the loans they service. On 79% of these, the monthly principal and interest payments were reduced by an average of 30.5%. Since they joined the Making Home Affordable Modification Program on July 22, 2009 they have initiated more than 6,800 loan modifications under that program.
Who is correct? Is the Attorney General correct or has AHMSI acted in the best interests of the people in Ohio whose loans they service? The courts will decide this. However, there is other information available which shows how AHMSI is working with people who are facing foreclosure and want to save their homes.
The Obama Administration publishes a monthly Servicer report showing how each company is performing in the Making Home Affordable Modification Program. The report through November of 2009 indicates that AHMSI’s loan modification activity has been very poor. Trial loan modifications have commenced on only 6.3% of all of the loans AHMSI services which the Administration estimates are eligible for modification. Thus far permanent modifications have only been offered on 201 loans. That is 2.6% of their loans with trial modifications.
The report indicates that trial loan modifications have been offered on 23% of all of the loans for all mortgage companies in the program. Permanent modifications have been offered on 31,382 loans. That is 4.1% of all loans with trial modifications. So AHMSI is right near the bottom.
Here are the figures for AHMSI from the report through November of 2009:
- 120,787 – Estimated loans eligible for modifications
- 12,621 – Trial Loan Modifications Offered
- 7,642 – Active Trial Loan Modifications
- 201 – Permanent Modifications
As these numbers indicate, AHMSI has just barely scratched the surface on the loans they are servicing where people are facing foreclosure. They report that they have modified more than 67,000 loans outside this program. There is no way to know how accurate this figure is since an independent company has not verified it. There also is no way to know how many loans that the company services which are outside the Making Home Affordable Modification Program are eligible for loan modifications.
A search on Google indicates that there have been numerous complaints from people nationwide whose loans AHMIS services. Many deal with the poor service they have received from the company when they asked for a loan modification. In August of 2009 there was one post which suggested that the people who had problems with AHMSI ban together and file a class action law suit against the company.
Much is at stake in these suits for the Ohio Attorney General, AHMSI and the people whose loans they service who are facing foreclosure.
The Attorney General has to protect the people of Ohio. He has to make sure that those who are facing foreclosure and who desire to save their homes are not mistreated by the mortgage companies handling their loans. If his suit is successful, then he will be able to go after other mortgage companies against whom complaints have been filed and get them to correct their ways.
IF AHMSI is successful, they will avoid penalties. They also will be able to process requests for loan modifications without governmental agencies looking over their shoulders and demanding that they handle these any differently than they are currently. If they lose the suit not only will they have to pay a penalty assessed by the state of Ohio for their actions, the company will also open itself up to law suits filed in other states. There is also the potential of a class action suit being filed against them.
If the Attorney General wins the suit, people facing foreclosure whose loans are serviced by AHMSI will get better service from the company when they request a loan modification. Their requests will be processed more timely. Any modifications will be fairer for them. If AHMSI wins the suit, then they will continue to be treated as they have been with little change being made by AHMSI.
It is unclear who is right. Are they allegations made against AHMSI by the Attorney General in Ohio correct? Are the assertions made by AHMSI about the job they are doing on loan modifications correct? If you are facing foreclosure and if your loan is being serviced by AHMSI, you should hire a lawyer skilled in foreclosure law to represent you. You have too much to lose if you don’t.
I would also recommend that regardless of who your mortgage company is, don’t try to get a loan modification on your own. Hire a lawyer or an expert in loan modifications to represent you. They can get a far better outcome for you.
You may also want to check out my EBook. It will help you understand the foreclosure process and the steps you can take to save your home. You can get more information on it by clicking Stop Foreclosure.
Much Success,
Mark Elkins
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