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Caliber Home Loans fined for allegedly steering struggling homeowners into risky mortgage modifications

Massachusetts claims Caliber offered interest-only loans instead of permanent mods

Caliber Home Loans will pay a $2 million fine and hand out an unknown number of mortgage modifications to borrowers in the state of Massachusetts to settle allegations that the company steered struggling homeowners into risky mortgage modifications.

The settlement stems from allegations brought by the office of Massachusetts Attorney General Maura Healey, which accused Caliber of failing to properly help borrowers avoid foreclosure.

According to Healey’s office, instead of modifying borrowers’ mortgages into stable, permanent modifications, Caliber allegedly modified borrowers’ loans into “unaffordable loan modifications with ballooning monthly payments they could not afford.”

Healey’s office alleged that Caliber violated the Massachusetts Act Preventing Unlawful and Unnecessary Foreclosures, a 2012 state law that requires creditors to “make a good faith effort to avoid foreclosure for borrowers whose mortgage loans have unfair subprime terms.”

Healey’s office said that it launched an investigation into Caliber’s mortgage servicing practices after discovering that Caliber “predominantly offered struggling homeowners loan modifications with payments that were temporarily lower and only covered the interest due on the loan each month.”

According to Healey’s office, Caliber “favored” short-term, interest-only mortgage modifications rather than permanent ones, even when a permanent modification was “commercially reasonable.”

Then, when the initial term of the mortgage expired, borrowers “would see their mortgage payments balloon to an amount even higher than what they originally were paying and could not afford, setting borrowers up to again face foreclosure,” Healey’s office said.

Additionally, Healey’s office claimed that Caliber “routinely gave borrowers the runaround” when they asked about certain missing documents that were required for the modification review process.

In a statement, Caliber said that it disagrees with some of Healey’s claims, but chose to settle the case nonetheless.

“While Caliber disagrees with certain of the State of Massachusetts Attorney General’s characterizations, we are pleased to resolve this matter on agreeable terms,” Caliber said in a statement provided to HousingWire. “We are proud of our ability to have helped over 118,000 homeowners stay in their homes during the past 10 years.”

Under the terms of the settlement, Caliber agreed to provide restitution and loan modifications to affected borrowers in Massachusetts and alter its business practices to ensure compliance with the state’s laws.

Specifically, Caliber will provide loan modification relief to borrowers who applied for modifications and were foreclosed upon due in part to Caliber’s alleged conduct, Healey’s office said.

Caliber will also be required to put a new loan modification program in place and review Massachusetts borrowers who currently have interest-only or short-term modifications to provide them a “more sustainable, affordable modification,” Healey’s office added.

“Mortgage servicing companies have a duty to help Massachusetts residents avoid foreclosure and stay in their homes,” Healey said in a statement. “Our settlement with Caliber will provide relief to borrowers across the state and sends a clear message that we will protect homeowners when companies break the law.”

The settlement is the second in the last few weeks for Healey’s office. At the end of March, Massachusetts settled with Ocwen Financial over alleged “widespread” mortgage servicing problems in the state.

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