State Attorney General Letitia James said the mortgage industry should...

State Attorney General Letitia James said the mortgage industry should be providing "transparent communications with homeowners." Credit: Charles Eckert

New York’s top prosecutor has reached a $17 million settlement with Caliber Home Loans Inc. that includes help for homeowners facing hardships.

The attorney general, Letitia James, said Tuesday the settlement requires the mortgage company to offer lower interest rates, longer terms and, in some cases, delays of certain payments until the end of the loan term.

James said in a statement that the mortgage industry “can — and should — be adopting measures that provide sustainable and affordable modifications, as well as more transparent communications with homeowners.” 

The settlement came after an investigation into what the attorney general’s office called Caliber's “deceptive and unfair practices.” Caliber is owned by affiliates of the Texas-based private equity firm Lone Star Funds, which purchased thousands of discounted, distressed mortgages from federal entities including Fannie Mae, Freddie Mac and the Department of Housing and Urban Development, according to the attorney general. New York State regulations require the company to offer affordable and sustainable modifications to homeowners in distress, but instead Caliber offered “interest-only and short-term modifications that reverted to much higher payments after a period of up to five years,” the attorney general’s office said.

Under the settlement, Caliber customers who received interest-only or short-term modifications must automatically be evaluated for the “NY Principal Reduction Modification,” which would include a 3.75% interest rate, terms of up to 40 years and deferrals of principal until the end of the loan term. If homeowners owe more than their property is worth, Caliber is required to reduce the loan balance to the home’s market value.

Caliber also is required to evaluate all its New York customers for potential modifications with similar terms, and it must communicate in “clear and understandable” ways and provide housing counselors and legal service providers with a contact person who will be accessible even if the home is in foreclosure.

The attorney general’s Homeowner Protection Program hotline  is 855-466-3456.

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