Mortgage

Caliber Home Loans settlement will provide $17 million in loan forgiveness to New Yorkers

Loan modifications could extend loan term to 40 years

New York Attorney General Letitia James announced on Tuesday that Caliber Home Loans is providing up to $17 million in mortgage loan forgiveness to its current customers in New York.

This settlement is for Caliber customers who were placed into interest-only loan modifications by the company, and will also benefit customers who continue to deal with economic repercussions from COVID-19.

“As COVID-19 continues to impair our state’s economy, mortgage servicers and investors should know that we will always prioritize homeownership for New Yorkers over profits for predatory lenders,” Attorney General James said in a statement.

Through this settlement, Caliber will be providing a modification by reducing interest rates to 3.75% for the life of the loan and extending the term up to 40 years, or deferring some of the principal to the end of the mortgage.

“This settlement shows that mortgage servicers can satisfy their financial responsibilities without ripping away the homes of innocent New Yorkers, and that there is no need for secrecy behind loan modification programs, which have kept homeowners in the dark about their best options for years,” James continued. “The industry can – and should – be adopting measures that provide sustainable and affordable modifications, as well as more transparent communications with homeowners.”

Caliber serviced thousands of mortgages that Lone Star Funds, its owner, purchased at a discount from multiple GSEs. This includes Fannie Mae, Freddie Mac, and the U.S. Department of Housing and Urban Development.

Instead of providing modifications, a statement from the New York attorney general alleges that Caliber prioritized interest-only and short-term modifications that reverted to much higher payments after a period of up to five years, creating a risk of redefault for the homeowners.

“This settlement mandates that all of its current customers in New York with an interest-only or short-term modification automatically be evaluated for the ‘NY Principal Reduction Modification,'” the statement said.

Caliber has changed the modification offer letters the company sends to homeowners to include terms that are clear and understandable. Caliber will also be required to provide New York State housing counselors and legal service providers a detailed description of the different mortgage modification programs available to New York homeowners, broken down by loan owners.

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