Foreclosure Relief Settlement for Massachusetts Homeowners

A national mortgage servicer—Shellpoint Mortgage Servicing—must provide $4 million in foreclosure relief to Massachusetts homeowners.

If you’re struggling to make your mortgage payments in Massachusetts and your loan servicer is Shellpoint Mortgage Servicing (Shellpoint), you might be eligible for foreclosure relief.

Under a December 2018 settlement with the state attorney general, Shellpoint has to provide millions of dollars to eligible borrowers in the form of principal balance reductions and short sale deficiency forgiveness. Shellpoint also has to improve its loss mitigation practices to better help homeowners avoid foreclosure.

Read on to learn more about the Shellpoint settlement.

The Shellpoint Investigation and Results

After receiving complaints from borrowers, the Massachusetts Attorney General (AG) Maura Healey investigated Shellpoint and alleged that the servicer violated Massachusetts foreclosure law, specifically Mass. Gen. Laws ch. 244, § 35B, which protects certain borrowers from foreclosure.

Right to Request a Modified Mortgage Loan Under Mass. Gen. Laws ch. 244, § 35B

Under Massachusetts law, the servicer must notify you of your right to request a modification if your loan is considered a subprime loan, called a “certain mortgage loan.” (Mass. Gen. Laws ch. 244, § 35B).

To qualify as a "certain mortgage loan" under the law, the loan must be on owner-occupied property and have any one of these features:

  • an introductory interest rate of three years or less that’s at least 2% lower than the fully indexed rate
  • interest-only payments for any period of time, except in the case where the mortgage loan is an open-end home equity line of credit or is a construction loan
  • a payment option feature, where any one of the payment options is less than principal and interest fully amortized over the life of the loan
  • the loan didn’t require full documentation of income or assets
  • prepayment penalties exceed Mass. Gen. Laws 183 § 56 or federal law
  • the loan was underwritten with a loan-to-value ratio at or above 90% and the ratio of the borrower's debt, including all housing-related and recurring monthly debt, to the borrower's income exceeded 38%, or
  • the loan was underwritten as a component of a loan transaction, in which the combined loan-to-value ratio exceeded 95%.

Vacation homes and rental properties don’t qualify; nor do loans financed by the Massachusetts Housing Finance Agency, loans originated through programs of the Massachusetts Housing Partnership Fund, or business loans.

If a loan qualifies, the servicer must send a notice that explains the borrower's right to request a loan modification. To be considered for a modification, the borrower has to respond within 30 calendar days from the date the notice was sent with all required documents. (To learn more about this law and other Massachusetts laws that protect homeowners from foreclosure, see Massachusetts Foreclosure Prevention Laws.)

Investigation Results

But the AG's investigation revealed that Shellpoint failed to comply with these requirements. Shellpoint also:

  • failed to provide a single point of contact for borrowers
  • mishandled calls from borrowers who had limited proficiency in English
  • didn’t deal effectively with homeowners who went through a divorce or the death of a coborrower
  • mismanaged loans that transferred from other servicers, and
  • didn’t provide timely and efficient loan modification reviews for eligible borrowers.

As a result, Shellpoint and the AG entered into a settlement agreement.

Relief for Eligible Homeowners

The settlement agreement requires Shellpoint to provide the following forms of relief to eligible borrowers.

Loan Modifications for Struggling Homeowners

Under the terms of the settlement, Shellpoint has to provide a total of $3.5 million in principal reductions through a loan modification program.

The settlement also requires Shellpoint to comply with certain standards for servicing loans. (Federal law, too, provides specific requirements and procedures that servicers must follow to help borrowers who are struggling to make their mortgage payments avoid a foreclosure.)

Short Sales

The settlement requires Shellpoint to waive the deficiency when eligible borrowers complete a short sale.

Relief for Borrowers Who Don't Qualify Under the Settlement

If you're struggling to make your mortgage payments, but you don't qualify under the settlement and Shellpoint services your loan, you may call Shellpoint to discuss modification and other foreclosure relief options. You might be eligible for a modification under a different program, like a Fannie Mae or Freddie Mac Flex Modification (if either one of those entities owns your loan), or a proprietary (in-house) modification, or for a different kind of loan workout.

You can learn more about modifications and other relief options at the Shellpoint Mortgage Servicing website.

Relief for Borrowers Who Don’t Have Shellpoint as a Servicer

The Massachusetts AG’s office has obtained settlements and various forms of relief from other servicers, including Morgan Stanley, Goldman Sachs, Royal Bank of Scotland, Citigroup, JPMorgan Chase, Countrywide, Fremont Investment & Loan, Option One, Ditech, HSBC, PHH, Nationstar. (Go to the Massachusetts AG website to learn about any of these settlements. Use the search function to look for information about a particular servicer settlement.)

Also, most servicers offer modifications, like Flex Modifications and proprietary modifications, as well as other types of foreclosure alternatives.

Getting Help

If you think your loan servicer is being deceptive or using abusive foreclosure or loan servicing practices, you may call the AG's consumer hotline at 617-727-8400.

If you’re facing imminent foreclosure and you suspect the servicer is violating the terms of this settlement—or is not in compliance with state or federal mortgage servicing laws—you should talk to a lawyer as soon as possible to learn about your options.

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