COPPELL, Texas, Aug. 9, 2011 /PRNewswire/ -- American Home Mortgage Servicing, Inc. (AHMSI) today announced that it has signed a settlement agreement with the Commonwealth of Massachusetts to implement the terms of a Consent Judgment between the Commonwealth and Option One Mortgage Corporation (Option One). The Consent Judgment relates to the modification of mortgage loans securing owner-occupied homes in the Commonwealth, originated by Option One after January 1, 2004, and serviced by AHMSI. The Consent Judgment, to which AHMSI is not a signatory, resolves the Commonwealth's claims against Option One, now known as Sand Canyon Corporation (Sand Canyon). In April 2008, AHMSI purchased Sand Canyon's mortgage loan servicing business.
"It's important to understand that at no time did the Commonwealth allege that AHMSI engaged in any wrongful conduct in either the origination or the servicing of these loans," said Jordan Dorchuck, chief legal officer of AHMSI. "In November 2008, AHMSI was dismissed as a party to the case except to the extent necessary to provide affected borrowers with an adequate legal remedy." At that time, the court ordered that AHMSI was not subject to civil penalties or the costs of investigation or attorneys' fees. AHMSI, however, remained a party to the case for the limited purpose, if needed, of providing borrowers of Option One-originated loans with an adequate legal remedy if the Commonwealth proved its case of predatory lending against Sand Canyon or if the parties settled their dispute, and a settlement occurred today.
The Consent Judgment provides that Sand Canyon will direct AHMSI to conduct a loan modification program for loans in default or where default is reasonably foreseeable. This modification program resembles, and in many, if not most cases, constitutes the federal government's Home Affordable Modification Program (HAMP) Principal Reduction Alternative program, whereby eligible borrowers will have a certain percentage of the principal balance of their loans forgiven over time if they remain current on their modified loan payments, as more particularly described in the Settlement Agreement. The number of loans affected is estimated to be less than 5,500 out of a total of approximately 8,000 loans originated by Option One and being serviced by AHMSI today. AHMSI has 90 days in which to implement the loan modification program.
In conjunction with the Settlement Agreement, the Attorney General has fileda Stipulation of Dismissal, dismissing the Commonwealth's claims against AHMSI with prejudice and without fees and costs. "However, the purchase and sale documents entered into in connection with the 2008 acquisition of Option One's servicing business gave Sand Canyon the authority to direct AHMSI to modify or attempt to modify the terms of these loans, and that is what AHMSI agreed to do in the Settlement Agreement," added Dorchuck. . No fines or penalties were assessed against AHMSI, and Sand Canyon has indemnified AHMSI against any third party claims that might result from AHMSI following their directions to implement this agreement.
Based in Coppell, Texas, AHMSI is the 15th largest mortgage servicer in the country managing nearly $74 billion in loan servicing, representing approximately 389,000 customers. Since its inception, AHMSI has modified over 175,000 mortgage loans, including over 27,000 under the U.S. government's HAMP program. AHMSI's more than 3,000 associates work each day with the mission of helping families preserve their dream of home ownership.
SOURCE American Home Mortgage Servicing, Inc.