Ohio Attorney General Richard Cordray has filed his third lawsuit against a mortgage servicer this year, this time suing Barclays' captive shop, HomEq Servicing.
Cordray alleges the New York-based servicer has issued unfair loan modification agreements and provided inadequate, incompetent customer service to Ohioans who were at risk of losing their homes to foreclosure. HomEq is a participant in the federal Home Affordable Modification Program (HAMP).
According to the lawsuit filed in Montgomery County Common Pleas Court, Ohio homeowners were forced to enter into modification agreements that released HomEq of all liabilities and required borrowers to waive their rights to defenses and agree to pay additional fees.
The lawsuit also alleges that HomEq violated Ohio's Consumer Sales Practices Act (CSPA) through "incompetent and inefficient customer service" by failing to return consumer calls or respond to repeated inquiries, losing borrowers' documents and failing to offer timely and affordable loss mitigation options.
"There has been ample time for loan servicers to strengthen their efforts and start making a significant difference in preventing home foreclosures," says Cordray. "Unfortunately, many servicers have, instead, repeatedly chosen to aggravate the crisis through noncompliance and excuses."
Cordray's lawsuit seeks a permanent injunction from the continuation of unfair and deceptive loan modification practices as well as consumer restitution, civil penalties and damages.
In a company statement, a HomEq spokesperson called the complaint "meritless."
"HomEq is committed to quality customer service and to working with financially distressed borrowers to help them remain in their homes," the statement said.
HomEq services more than 10,000 subprime loans in Ohio and became a HAMP participant in August. Through November, the company had offered HAMP trial plans to about 2,000 borrowers and had yet to start a permanent modification. The Treasury estimates HomEq's eligible 60+ day delinquencies to total 40,969.
Cordray's previous lawsuits include one filed against Carrington Mortgage Services in July and one filed against American Home Mortgage Servicing Inc. in November.