Press Release  AG Campbell Secures $2 Million Settlement With Mortgage Loan Servicer For Violating Consumer Protection, Foreclosure Prevention Laws

BOSTON — Attorney General Andrea Joy Campbell today announced that her office has reached a $2 million settlement with a Texas-based residential mortgage loan servicer, Cypress Loan Servicing LLC (Cypress), formerly known as Rushmore Loan Management Services LLC. The settlement resolves allegations that the company violated Massachusetts’ consumer protection, foreclosure prevention, and debt collection laws, putting homeowners at unnecessary and unlawful risk of foreclosure. 

As part of the settlement, Cypress will pay $2 million to the Commonwealth; make extensive changes to its business practices to ensure compliance with applicable Massachusetts law; and regularly report on its compliance with the settlement to the Attorney General’s Office (AGO). In addition to penalties to the state, the monetary payment is expected to provide restitution for certain impacted consumers who experienced foreclosure.  

“When mortgage loan servicers like Cypress violate our critical consumer protection and foreclosure prevention laws, they aren’t just breaking the rules – they are causing real pain and instability for Massachusetts residents and families,” said AG Campbell. “I am proud to announce this settlement, which will help ensure compliance with meaningful consumer protections and put mortgage servicers on notice that Massachusetts will not tolerate unlawful practices that put profit over people.”  

The AGO alleged that Cypress engaged in significant violations of the Massachusetts foreclosure-prevention law, known as Section 35B, which was enacted in 2012 in the wake of the foreclosure crisis and requires mortgage servicers to make a good faith effort to help financially struggling borrowers avoid foreclosures, including by providing required notice of borrowers’ right to pursue an affordable loan modification on certain mortgage loans. In reviewing loan modification applications under 35B, creditors must consider the consumer’s ability to pay, as well as other factors, such that any resulting loan modification is affordable. The AGO alleged that in many instances, Cypress unlawfully required consumers to pay large upfront down payments that were not subject to an affordability analysis as a threshold requirement to entering an otherwise affordable loan modification. Thus, consumers who could not afford these down payments were unable to access the modification and some ultimately were forced into an otherwise preventable foreclosure.   

The AGO further alleged that the company failed to comply with additional substantive and procedural requirements of 35B, including failures to send timely responses to loan modification applications within 30 days; failures to notify loan modification applicants of missing information needed to complete their application assessments within five days of receipt of the applications; failures in some instances to provide borrowers with any written assessment of their loan modification application; and, where a written assessment was issued, categoric failure to provide important required disclosures to loan modification applicants that could impact their ability to challenge improper denials or make effective counteroffers.  

The AGO asserts that by failing to comply with these essential requirements of 35B, the company unfairly and unnecessarily put financially vulnerable homeowners at high risk of foreclosure.  

Additionally, the AGO alleged that, in violation of Massachusetts’ debt collection regulations, Cypress made unlawful debt collection calls to consumers in thousands of instances that were in excess of the state’s legal limit of two debt collection calls per week. Furthermore, the AGO alleged that the company failed to send consumers timely Debt Validation Notices within five days of initially communicating a debt collection to consumers, as legally required.  

The AGO’s settlement pertains to alleged conduct that Cypress engaged in while operating as a direct mortgage loan servicer under the name “Rushmore Loan Management Services LLC.” Cypress has since sold its entire mortgage loan portfolio and rebranded as a master loan servicer, but retains the ability to subcontract direct loan servicers and to resume operating as a direct mortgage servicer in the future. Under the terms of the settlement, Cypress will make significant changes to its business practices that will apply to both of these potential roles. First, Cypress will assume responsibility for monitoring subservicers it may contract with and taking action as needed to ensure compliance with Massachusetts law. Second, in the event the company resumes direct servicing, Cypress will implement detailed business practice changes targeting past noncompliance and ensuring compliant operations in the future.  

The settlement, reached via an assurance of discontinuance filed in Suffolk County Superior Court, may be viewed in its entirety here.

This matter was handled by Assistant Attorney General Mercy Cover, Paralegal Noam Miller, Division Chief Yael Shavit, and Deputy Division Chief Michael Turi, all of the AGO’s Consumer Protection Division, which is tasked with enforcing Massachusetts’ nation-leading consumer protection laws. 

This matter is representative of AG Campbell’s commitment to advancing economic opportunity and consumer justice for all, including by championing access to affordable housing and protecting homeowners from unfair and deceptive business practices. Earlier this year, AG Campbell filed a nation-leading state enforcement action against a home equity investment company, alleging violations of the state’s consumer protection and mortgage laws. Additionally, last fall, AG Campbell reached a precedent-setting settlement with a servicer of “zombie second mortgages,” resolving allegations that the company violated the state’s consumer protection laws by improperly attempting to collect old mortgage debts.

Consumers who believe they have been subjected to an unfair or deceptive business practice, including by a mortgage servicer, may file a consumer complaint with the AGO online by visiting mass.gov/ago/consumercomplaint. 

###