Cypress Loan Servicing received an assurance of discontinuance from Massachusetts Superior Court in Suffolk County after agreeing to pay $2 million to settle legacy allegations.
The payment by the company, which previously operated as Rushmore Loan Management Services, will go toward a state penalty and borrower restitution. The court agreement calls for business practice change and monitoring. It does not admit or prove wrongdoing.
Massachusetts Attorney General Andrea Joy Campbell’s statements about the settlement point to renewed interest within the state related to enforcing laws around ensuring servicers follow
Campbell said in a press release that the settlement “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 company could not immediately be reached for comment at deadline.
Cypress sold its loan portfolio and had rebranded as a master loan servicer “but retains the ability to subcontract direct loan servicers,” according to the Massachusetts AG’s press release. The company also retains the ability to work with borrowers again in the future.
The state’s concerns centered in part on loan modification allegations related to state rule 35B, which requires ability-to-repay assessments, timely responses to applications when information is missing, written assessments and disclosures essential for negotiation.
“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,” the AG alleged.
The AG also alleged that the company did not follow debt collection rules around call limits and disclosures.
In terms of business practice requirements, the agreement with the state requires the company to ensure that its subservicers are compliant. If the company returns to its role as a direct servicer, it will “implement detailed business practice changes targeting past noncompliance.”
The state AG also entered into an agreement from Franklin Credit Management late last year that settled alleged violations of debt collection rules calling for certain types of borrower communication and good-faith efforts to avoid foreclosure.
In that settlement, the company agreed to pay a $300,000 penalty and cease collections on a portfolio of old second liens in the state begun after a long period of inactivity. The move effectively erased $10 million in borrower debt related to so-called zombie seconds.
Zombie seconds also were the focus of
Other recent mortgage-related enforcement actions the Massachusetts AG has pursued include
The company said none of the 563 clients it has initiated 10-year agreements with since its founding in 2018 have reached the end of their terms or reported foreclosure.
“Hometap firmly believes in the integrity of our products,” the company said in a statement early this year.
