AG Coakley Announces $5 Million in Payments to Borrowers Affected by Option One’s Lending Practices
More Than 500 Checks Recently Distributed as a Result of AG’s Settlement with Option One; Loan Modification Program Has Achieved $85.8 Million in Principal Reduction to Date
BOSTON – As part of a settlement with Sand Canyon Corporation (formerly Option One Mortgage Corporation), a subsidiary of H&R Block, Inc., the Commonwealth has recently distributed payments totaling close to $5 million to borrowers affected by the company’s alleged predatory lending practices, Attorney General Martha Coakley announced today.
More than 500 affected borrowers throughout the Commonwealth who received their loans from Option One between 2004 and 2007 have been sent checks ranging from $5,000 to $25,000.
“We are pleased to see that borrowers victimized by unsound lending practices are receiving meaningful relief,” AG Coakley said. “The results from this settlement demonstrate that loan modifications providing principal forgiveness can directly and substantially assist struggling homeowners and help restore a healthy economy to our Commonwealth.”
The settlement also provides relief for borrowers who still have an Option One loan with an aggressive loan modification program that gives significant write-downs of principal balances and reduction of interest rates, depending on the presence of certain risk features in the loan. To date, 812 borrowers have received loan modifications through the settlement, resulting in an estimated $85.8 million in principal reduction and more than $38 million in monthly payments reduced.
The payments are part of the settlement AG Coakley’s Office entered into in August 2011, in which Option One agreed to pay $9.8 million to resolve claims of discriminatory and unfair mortgage lending practices.
The lawsuit asserted that Option One knew that many of the loans it originated posed an excessive risk of default and foreclosure and were doomed to fail but that it originated them nonetheless in order to sell them to the secondary market and realize a quick profit.
In the lawsuit, the AG’s Office also alleged that Option One’s discretionary pricing policies gave mortgage brokers free reign to charge excessive and unjustified fees, causing African-American and Latino borrowers to pay more money, on average, for their loans than other, similarly-situated borrowers. In 2008, when the lawsuit was filed, it was the first by a state AG’s Office alleging a civil rights claim against a subprime lender. As a result, last August it was announced that 2,100 minority borrowers received a total of $1.75 million in payments due to Option One’s alleged discriminatory lending practices.
Borrowers with questions about the loan modification program are encouraged to call (617) 963-2660 to speak with personnel from the AG’s Office dedicated to implementation of the settlement. Individuals with questions about the payment distribution can call the Commonwealth’s claims administrator, AB Data, Inc., at (866) 828-2555.
AG Coakley is a national leader in protecting homeowners from the harms caused by the subprime marketplace. Over the past four years, AG Coakley has obtained recoveries from Option One, Morgan Stanley, Royal Bank of Scotland, Goldman Sachs, Bank of America, and Fremont Investment & Loan, for their roles in the subprime lending crisis.