Lawsuits Target Sloppy Loan Modification Programs

We have been reporting here about the sloppy practices of many servicers participating in HAMP, the federal loan modification program.  We have received many reports of servicers failing to call borrowers back, repeatedly losing the paperwork submitted by borrowers and being stuck in the purgatory of the servicer's automated phone system.

Ohio's Attorney General, Richard Cordray has decided that the citizens of Ohio have had enough.  As reported by on the site TheFreeLibrary.Com, AG Cordray has filed at least two lawsuits against servicers for consumer protection violations arising from their management of their loan modification programs.  As noted in TheFree Library.Com article: " The new lawsuit alleges that American Home Mortgage Servicing Inc. 'required loan-modification agreements that forced consumers to pay excessive fees and waive their rights in order to get help. The suit also alleges that the terms of loan modifications were unconscionably one-sided in favor of AHMSI.'"

The Ohio AG's lawsuits are part of a wave of lawsuits challenging lenders and servicers for alleged sloppy practices in their loan modification programs.  As we have mentioned here, the federal loan modification guidelines prevent a servicer or lender from charging up-front fees to request a loan modification and also require the waiver of late fees both before and during the loan modification process. 

We will keep track of the Ohio AG's cases and applaud his efforts to make sure that the consumers of Ohio get their money's worth for the TARP funds which taxpayers provided for bank bail-outs.