OAKLAND, CALIFORNIA – A class-action lawsuit filed in the U.S. District Court for the Southern District of California alleges that Specialized Loan Servicing (SLS)
improperly processed loan modification applications for customers in California
that often led to overpayments on the loan and unjust foreclosures of the
Plaintiffs’ representative Tycko & Zavareei LLP said in a news release
that the U.S. Consumer Financial Protection Bureau (CFPB) implemented a series
of guidelines designed to force banks and mortgage servicers to process loan
modification requests quickly, accurately and transparently to stem the tide of
defaults and foreclosures after the Great Recession of 2007 and 2008.
Those guidelines went into effect in January 2014 and give
homeowners the right to sue mortgage servicers who violate them.
The class-action lawsuit alleges that SLS violated the CFPB’s
new guidelines and failed to bring its system for processing loan modification
applications into compliance.
“We believe that SLS’s noncompliance has caused borrowers to
lose their homes or to be placed in foreclosure,” Tycko & Zavareei partner
Lorenzo Cellini told the Northern
California Record. “We also believe that borrowers have lost equity in
their homes as a result of SLS assessing improper and unwarranted fees to the
balance of their mortgage.”
In addition, Cellini said borrowers have had been forced to
unnecessarily spend substantial amounts of time and endure administrative
burdens and costs of resubmitting documents to SLS, creating a stressful and
fearful environment among borrowers who are facing the prospect of losing their
Specifically, the lawsuit alleges that SLS failed to timely
respond to loan modification applications; failed to inform borrowers about what
information was missing in order to process their loan modification
application; falsely told borrowers their applications were missing information
that had already been provided on numerous occasions; denied borrowers’ loan
modification requests without an appropriate explanation; and wrongfully
threatened foreclosure while a borrower’s application was still under review.
“The lawsuit seeks to force SLS to comply with the
guidelines and to compensate borrowers that were harmed as a result of its
noncompliance,” Cellini said.
Margarette Smith, an 88-year old homeowner, is the named
plaintiff in the lawsuit.
The firm said Smith attempted to comply with the
requirements set forth by SLS in numerous letters each month, but, despite
providing SLS with all the paperwork requested, including providing some
documents multiple times, was still denied a proper loan modification. Tycko
& Zavareei said the inability to modify her mortgage means Smith may lose
Cellini said the plaintiffs’ attorneys do not know the
precise number of affected borrowers at this time.
“We believe there have been thousands affected by SLS’s
failure to comply,” Cellini said.
The firm said it is seeking homeowners who have applied for
a home loan modification with SLS since January 2014 and were denied a
modification, or believe their application was processed improperly.
In addition, Cellini said SLS is likely not the only
mortgage servicer that is guilty of noncompliance with the new CFPB guidelines.
“We believe that noncompliance with the new guidelines is
widespread and that other servicers besides SLS are also not in compliance,” he