Servis One, which does business under the name
The affected borrowers live in New York City, on Long Island and in Rochester. The attorney general alleged BSI encouraged them to continue making at least a partial payment on their mortgage and did not offer mandatory relief
If anything, BSI did not acknowledge the passage of that pandemic-related revision to the state banking law "in its internal 'COVID-19 Disaster Relief Policy & Procedures' manual until after the OAG initiated this investigation," a related legal filing said.
"During the height of the pandemic, as we were grappling with fear, stress, and financial difficulties, these homeowners were denied the basic support they were supposed to receive," said Attorney General Letitia James in a press release. "BSI violated the law and left hundreds of families worrying about keeping a roof over their heads when they qualified for mortgage relief."
Back in December 2021, James
In one instance recounted in both the press release and legal document, a borrower who reported he was in financial hardship was allegedly told by a BSI agent to use his unemployment benefits or reduced income to make partial payments, even though the borrower qualified for a forbearance.
Supposedly for other borrowers, BSI granted forbearances on a month-to-month basis. At least once, it told a borrower that future forbearance relief was contingent on their willingness to make partial or future payments.
"In these and other instances, BSI did not consistently explain to homeowners the relief available under Section 9-x [of the New York Banking Law], and instead offered loss mitigation to its customers in a manner intended to identify the maximum amount that a homeowner could afford to pay," the legal papers said.
Under the agreement, BSI is not allowed to make public statements that deny, either directly or indirectly, any findings listed in the filing or create the impression that it is without legal or factual basis.
"Respondent does not contest the OAG's assertion that in some instances its actions violated the statutory provisions cited above," the papers, called an Assurance of Discontinuance, declared. "Respondent has agreed to this assurance in settlement of the violations described above and to avoid the time, expense, and distraction of litigation."
BSI sent a letter to its institutional clients prior to the public announcement of the agreement.
"We identified a small number of borrowers that may have not been given the precise accommodation provided by the statute; however, it is important to note that the statute provided for an application process, and that BSI provided forbearances, or otherwise provided other temporary or permanent loss mitigation options, to borrowers who demonstrated a COVID impact through submission of a loss mitigation application and based on specific client instructions for forbearance review," the letter said.
"Nevertheless, BSI has agreed to a combined monetary penalty and remediation fund in an immaterial amount and has agreed to provide forbearances and deferments to a specific subset of borrowers who were not seriously delinquent at the onset of the pandemic and who became at least 60 days delinquent during the applicable period defined by New York Banking Law 9-X, which expired on Dec. 31, 2021."
Borrowers eligible for relief must have had their privately held owner-occupied mortgage serviced by BSI between March 7, 2020 and Dec. 31, 2021. It must have been 60 or more days past due at any point during that period, but it couldn't have been more than 180 days late or in foreclosure on March 7, 2020.
If the loan is no longer serviced by BSI, it must have been at least 30 days past due on the date the servicing rights were transferred.
BSI will send borrowers a letter stating the relief to which they may be entitled, in addition to providing information regarding legal defenses to foreclosure and the availability of free legal services.
It will also include a claim form in which the borrower must state under penalty of perjury that the affected property was their primary residence and that they suffered a financial hardship as a result of COVID-19 during the time period listed.
Eligible borrowers will have payments deferred for six months, without additional interest, late fees or penalties, unless it was more than 180 days late; if so the borrower gets an additional six month deferral.
The forborne amounts are to be deferred, without interest, to the end of the loan term.
Borrowers who remain delinquent after the forbearance ends will be able to apply for a loan modification or other form of loss mitigation.
Former BSI customers will get cash equal to their monthly mortgage payment (up to two months) multiplied by the number of months the borrower was in default at the time of the servicing transfer.
A separate class of 18 borrowers are eligible to have the interest they paid used to reduce their current principal due.
The $350,000 penalty will be reduced by each dollar of restitution paid to the borrowers, the agreement said.
