On July 31, Ohio Attorney General Richard Cordray filed a joint lawsuit with the Ohio Department of Commerce against Carrington Mortgage Services, LLC, pertaining to Carrington’s obligations pursuant to a January, 2008, agreement with the State, which settled litigation relating to New Century Mortgage Corporation. Carrington purchased the right to service certain New Century loans, and agreed to negotiate in good faith with the borrowers in an effort to bring the loans current or otherwise avoid a foreclosure through a reasonable workout or other resolution.
In the new lawsuit, the State of Ohio claims that Carrington breached the agreement and is in violation of the Ohio Consumer Sales Practices Act based upon allegations that Carrington has engaged in the following action and practices with regard to the loans in question:
- Providing inadequate and inefficient customer service
- Failing to respond to borrower requests for assistance
- Failing to offer loss mitigation options to borrowers
- Misrepresenting to borrowers the company’s ability to engage in loss mitigation in Ohio
- Misrepresenting to borrowers the company’s contacts with the Ohio Attorney General’s Office
- Imposing unjustified and unreasonable fees and other charges, including attorney’s fees
- Failing to reasonably exhaust loss mitigation efforts before filing foreclosure actions
- Threatening foreclosure while engaging in loss mitigation efforts
- Pressuring borrowers to enter into loan modifications without providing the borrower adequate time to review the contract or consult legal counsel
- Misrepresenting the terms of loan modifications offered
- Misrepresenting the benefits of loan modifications offered
- Misrepresenting a loan modification to be completed when it was not true
- Requiring borrowers to sign loan modifications that are unconscionably one-sided in the lender’s favor
The complaint seeks a permanent injunction for those acts or practices to cease, and to prohibit Carrington from instituting or continuing to prosecute foreclosures against residential mortgage loan borrowers in Ohio until complying with the agreement. The complaint further seeks orders for Carrington to reimburse the consumers, to pay damages to the state, and to reform the mortgage loan notes and completed loan modifications pursuant to the agreement. Finally, the complaint seeks punitive damages, the imposition of fines, and an order that Carrington maintain all business records relating to its servicing of residential mortgage loans in Ohio for five years, and to permit the Attorney General to inspect and copy all such records.
This case clearly is based on Carrington’s prior express written agreement with the State, and therefore does not directly relate to any other servicer. However, all servicers should take notice that this action could be the start of a developing trend, especially in Ohio. Mr, Cordray claims to be the first Attorney General in the nation to file suit against a mortgage servicer in the wake of the foreclosure crisis, and was quoted as saying, "This lawsuit makes it clear that we have reached zero tolerance for this kind of behavior from loan servicers. 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."
To view a copy of the complaint filed in this matter, go here.
If you have any questions on this information, please contact Mr. Larry R. Rothenberg, Esq. Larry Rothenberg is the partner-in-charge of the Cleveland real estate and foreclosure department of Weltman, Weinberg & Reis Co., L.P.A. He is the author of the Ohio Jurisdictional Section contained within the treatise, “The Law of Distressed Real Estate”, published by The West Group. The firm handles foreclosures and related litigation throughout Ohio, Kentucky, Indiana, Illinois, Pennsylvania and Michigan. Larry can be reached at (216) 685-1135 or via e-mail at lrothenberg@weltman.com.
Client Advisory is published by Weltman, Weinberg & Reis Co., L.P.A., an organization providing comprehensive creditor representation. The information contained in this advisory is a summary of legal information and is not intended to constitute legal advice on specific matters or create an attorney-client relationship. Contact any of our offices or visit our website at realestatedefaultgroup.com for more real estate related information, company facts and attorney profiles. (c)2009