OAKLAND, CALIFORNIA – A class-action lawsuit filed in the U.S. District Court for the Southern District of California alleges that Specialized Loan Servicing (SLS) improperly processed loan modification applications for customers in California that often led to overpayments on the loan and unjust foreclosures of the borrower’s home.
Plaintiffs’ representative Tycko & Zavareei LLP said in a news release that the U.S. Consumer Financial Protection Bureau (CFPB) implemented a series of guidelines designed to force banks and mortgage servicers to process loan modification requests quickly, accurately and transparently to stem the tide of defaults and foreclosures after the Great Recession of 2007 and 2008.
Those guidelines went into effect in January 2014 and give homeowners the right to sue mortgage servicers who violate them.
The class-action lawsuit alleges that SLS violated the CFPB’s new guidelines and failed to bring its system for processing loan modification applications into compliance.
“We believe that SLS’s noncompliance has caused borrowers to lose their homes or to be placed in foreclosure,” Tycko & Zavareei partner Lorenzo Cellini told the Northern California Record. “We also believe that borrowers have lost equity in their homes as a result of SLS assessing improper and unwarranted fees to the balance of their mortgage.”
In addition, Cellini said borrowers have had been forced to unnecessarily spend substantial amounts of time and endure administrative burdens and costs of resubmitting documents to SLS, creating a stressful and fearful environment among borrowers who are facing the prospect of losing their homes.
Specifically, the lawsuit alleges that SLS failed to timely respond to loan modification applications; failed to inform borrowers about what information was missing in order to process their loan modification application; falsely told borrowers their applications were missing information that had already been provided on numerous occasions; denied borrowers’ loan modification requests without an appropriate explanation; and wrongfully threatened foreclosure while a borrower’s application was still under review.
“The lawsuit seeks to force SLS to comply with the guidelines and to compensate borrowers that were harmed as a result of its noncompliance,” Cellini said.
Loan Modification Key curated from here.