A lender owned by an affiliate of Texas-based Lone Star Funds has reached a settlement after an investigation found it engaged in unfair lending practices.
Caliber Home Loans will provide its borrowers with $17 million in relief, according to an announcement by New York Attorney General Letitia James’ office.
An investigation by the AG’s office concluded that Caliber had placed thousands of customers into unfair, interest-only loan modifications that reverted to higher payments after five or less years. The settlement money will be paid back to customers in the form of loan forgiveness.
“As COVID-19 continues to impair our state’s economy, mortgage servicers and investors should know that we will always prioritize home ownership for New Yorkers over profits for predatory lenders,” James said in a statement.
By settling, the firm — owned by affiliates of private equity fund managers Trillian Fund and Lone Star Funds — neither admits nor denies that it failed to disclose information about their loan modifications, which the AG alleges allowed Caliber to prey on its customers.
The settlement requires that the company offer lower interest rates, longer terms and delays of certain payments until the end of the loan term for some customers.
Across the country, the Consumer Financial Protection Bureau has received over 1,200 complaints about Caliber, the majority of which are about issues with mortgage payments. New York is one of the states with the highest number of complaints, with a total of 89.
In one complaint, a person, who claims to be eldelry, alleges that Caliber used hidden language to delay the loan modification process. The customer, who submitted the complaint in 2018, said that they owed $61,000.
“I was falling deeper in debts since they are adding all types of fees on top of my mortgage,” the anonymous statement said. “I can not get a good faith review of my loan modification application and I am caught in this horrible vicious cycle. I am seeking your help, I can not lose my home, it is everything that I have.”
Another customer wrote in a 2019 complaint that they had called Caliber after receiving an email from the company about lowering payments on their mortgage.
The customer was told that they would not be charged any additional costs, but after reviewing the refinancing agreement, found an additional $10,000 in closing costs plus a higher interest rate. Caliber refused the customer’s attempts to cancel the agreement, according to the complaint.
Under the settlement, all of Caliber’s customers in New York with an interest-only or short-term modification will automatically be considered for a 3.75 percent interest rate, terms of up to 40 years and monthly mortgage payment equal to their current interest-only payment, which would be inclusive of principal, interest, taxes and insurance.
For “underwater” homeowners who owe more than what their property is worth, Caliber is required to reduce principal balances to the home’s market value.
In all, Caliber estimates that the potential loan forgiveness alone would be valued at approximately $17 million.
Even borrowers without an interest-only or short-term modification can apply for relief from Caliber, which would include a 3.75 percent interest rate and terms of up to 40 years.
The settlement also requires that Caliber be transparent with New York borrowers by rewriting its terms to be more understandable by the general public, and providing housing counselors and attorneys with detailed descriptions of its different mortgage modification programs and escalation contacts.