Coakley, AHMSI Reach Agreement Over Servicing Of Subprime Loans

The office of Massachusetts Attorney General Martha Coakley has entered into an agreement with Texas-based American Home Mortgage Servicing Inc. (AHMSI) that will provide benefits to approximately 8,200 Massachusetts borrowers holding loans originated by Option One Mortgage Corp. and H&R Block Mortgage Corp.

Those mortgage loans are the subject of a lawsuit that Coakley's office filed in June 2008. The complaint alleges Option One and H&R Block Mortgage originated subprime loans with reckless disregard for whether borrowers would be able to afford their loan payments. Under the agreement, filed in Suffolk Superior Court, AHMSI will be required to provide affordable loan modifications to certain borrowers who fall behind on their mortgage payments.

In April 2008, AHMSI purchased the right to service the Option One and H&R Block Mortgage loans. As a result, AHMSI was named as a defendant in the office's ongoing enforcement action, and became subject to certain obligations under a preliminary injunction issued by the Suffolk Superior Court in November 2008, which limited the defendant's ability to foreclose on the loans originated by Option One and H&R Block Mortgage.

Coakley's complaint did not allege loan origination misconduct by AHMSI, and the company cooperated with the attorney general's office in reaching this agreement.

The agreement provides that some borrowers holding Option One and H&R Block Mortgage loans now serviced by AHMSI will receive loan modifications, while other borrowers, if ineligible for a modification, will receive relocation payments. Coakley's office will also have the ability to object to AHMSI-initated foreclosures or loan modifications that the servicer denies.

In cases where AHMSI and Coakley's office are unable to come to a resolution, AHSMI will have to obtain court approval to foreclose.

Coakley's litigation with Option One, H&R Block Mortgage, Block Financial Corp. and their parent company, H&R Block Inc., is ongoing, and is expected to go to trial in 2010. The lawsuit is seeking redress for the damage incurred by homeowners and Massachusetts communities as a result of the unfair and deceptive lending practices of the defendants.Â

The lawsuit also alleges civil rights violations because the defendants' policies and practices resulted in discriminatory pricing to the detriment of black and Hispanic borrowers.

SOURCE: Office of Massachusetts Attorney General Martha Coakley

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