BOSTON — A national mortgage servicer will provide $3.2 million in relief for Massachusetts consumers to settle allegations that it engaged in unfair and deceptive conduct through its mortgage servicing, debt collection, and foreclosure practices, Attorney General Maura Healey announced.

The assurance of discontinuance, filed in Suffolk Superior Court, alleges that Fay Servicing, LLC failed to take required steps to help homeowners avoid foreclosure, harassed consumers with excessive debt collection calls, failed to inform borrowers of their right to request verification of the amount of their debt, and in some instances, unfairly charged foreclosure-related fees before obtaining authority to foreclose.

"Mortgage servicers are required to make a good faith effort to help prevent unnecessary foreclosures and keep Massachusetts families in their homes,” said AG Healey. “This settlement will help put money back in the pockets of borrowers who were harmed and ensure that this company complies with the law.”

The AG’s Office alleges that Fay Servicing violated the Massachusetts Act Preventing Unlawful and Unnecessary Foreclosures, also known as “35B,” a law that requires mortgage servicers to make a good faith effort to help borrowers with unfair loan terms avoid foreclosure. This involves providing notice and opportunity for borrowers to apply and be reviewed for loan modifications. A good faith modification review under 35B must include, among other things, consideration of the borrower’s ability to pay and the affordability of the modification. The AG’s Office alleges that Fay Servicing offered loan modifications that required borrowers to pay very large, up front “good faith down payments” which were not subject to an affordability analysis. This practice often prevented eligible homeowners from entering otherwise affordable loan modifications.

The AG’s Office alleges other 35B violations by Fay Servicing including: failure to complete timely reviews of borrowers’ loan modification applications, failure to disclose reasons for denying a loan modification, and failure to provide borrowers with notice of their right to present a counteroffer. Fay Servicing also did not provide borrowers with a written assessment required by law, which provides borrowers with the company’s calculation of the borrower’s income, debts, and obligations, and the company’s analysis weighing foreclosure against modification.

The AG’s Office also found that, in some instances, Fay Servicing initiated foreclosure processes—including charging borrowers foreclosure-related fees—before it had authority to foreclose.

In addition, Fay Servicing employees allegedly made frequent calls to borrowers to collect on their debts, calling multiple phone numbers and on multiple days in a week, far in excess of the number of calls permitted by state law. Under the AG’s Debt Collection Regulations, creditors cannot call more than twice in a seven-day period, and must, within five days of an initial debt collection communication, provide borrowers with notice and opportunity to validate the amount of the debt. The AG’s Office also alleges Fay Servicing failed to provide hundreds of borrowers with required debt validation notices.

Under the terms of the settlement, Fay Servicing must provide affected homeowners with $2.7 million in direct borrower relief in the form of principal forgiveness for eligible loans. The company will also pay $500,000 to the state and make significant changes to its business practices in order to better assist struggling borrowers.

AG Healey remains committed to ensuring that mortgage servicers and other creditors respect the rights of homeowners under state law. The AG’s Office has been a national leader in securing restitution and other relief for borrowers from banks and servicers, including HSBC, Ditech, Nationstar, Shellpoint Mortgage Servicing, Caliber Home Loans, PHH, Bayview, Seterus, and others on behalf of Massachusetts homeowners.

This case was handled by Assistant Attorneys General Alda Chan and Mercy Cover of the AG’s Consumer Protection Division

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