Ohio Sues Carrington for Failure to Help Curb Repo Homes
Carrington Mortgage Services, one of the largest subprime loan servicers in the country, has been sued by Ohio Attorney General Richard Cordray for its failure to carry out its agreement to help troubled customers prevent their houses from becoming repo homes.
The Attorney General, together with the Ohio Department of Commerce, claimed that Carrington failed to carry out the provisions of an agreement in January 2008 to modify loans to cut down foreclosures across the state. The lawsuit also claimed that Carrington violated state consumer laws with its failure to serve its customers.
In 2008, Carrington signed an agreement with the state to resolve the state’s dispute with defunct subprime lender New Century Financial Corporation, which was acquired by Carrington’s parent company Carrington Capital Management in 2007.
Cordray reiterated that the lawsuit shows that the state is serious in going after mortgage lenders and servicers who refuse to carry out the Making Home Affordable program by rejecting loan modification applications from their troubled customers.
He also explained the importance of stopping the continued rise in foreclosures as these feed the cycle of defaults that are blocking housing market recovery and economic resurgence.
In a recent report on foreclosure postings nationwide for the first 6 months of 2009, Ohio was ranked 12th in a ranking of states based on their foreclosure rates. One housing unit out of 86 households across the state was hit with a foreclosure filing, with nearly 59,000 households in default or in the last stages of the foreclosure process.
In June, Ohio had more than 11,000 households in various stages of foreclosure, with more than 3,000 units already counted as real estate owned properties. Ohio was tenth among states based on foreclosure rates in June.
Attorney General Cordray said his office sued to seek restitution for customers and civil damages and penalties.
Mortgage servicers are among the financial institutions expected to help slow down the pace of foreclosures because they are the ones collecting and distributing monthly loan payments from borrowers to investors. Months ago, more than 24 mortgage servicers committed to carry out the Home Affordable Modification Program, which provides cash incentives for all successful loan modifications worked out.
In response to the lawsuit, Carrington Mortgage emailed a statement to the media saying the lawsuit is meritless. The company claimed that it had completed loan modifications for about half of its mortgage borrowers.
