The state of Ohio has filed a lawsuit alleging Carrington Mortgage Services LLC breached its agreement to offer “reasonable” loan modifications to eligible borrowers.
The state and Carrington entered a pact in January 2008 to resolve a dispute arising from the state’s New Century Financial Corp. litigation, requiring the company to engage in “good faith” negotiations to help New Century borrowers avoid foreclosure.
Carrington acquired New Century’s mortgage-servicing platform in a 2007 bankruptcy auction. New Century had been the second-largest provider of loans to high-risk borrowers, making it one of the earliest casualties when the housing bubble burst.
The complaint, filed by state Attorney General Richard Cordray and the Ohio Department of Commerce, also charges the company violated state law by providing “incompetent, inadequate and inefficient” service in connection with the servicing of Ohio mortgages.
“This lawsuit makes it clear that we have reached zero tolerance for this kind of behavior from loan servicers,” Cordray said. “We’ve tried to work with them, but now we must take action. I am determined to see that mortgage servicers step up, take responsibility and start making it right with Ohioans. No more excuses.”
The suit seeks consumer restitution, civil penalties and damages as well as a court order requiring Carrington to improve its customer service.
I have mixed feelings about this case. There is the side of me that blames these banks for having involved themselves in silly practices giving loans that common sense says people could not pay back. That part of me is enjoying that the consumer is getting some kind of restitution from the banks through legislation and the courts. Now when I use my markets side of my brain it really concerns me as if the courts are given the power to force banks to rework loans it will increase the risk to any lender thereby increasing the yield demanded on mortgages loan products in the secondary market. This will lead to higher interest rates to all consumers. In the end I think the consumer looses.
James Wheelock