A group of mortgage debt buyers must pay more than $480,000 in penalties and restitution and stop demanding expired mortgage payments according to an announcement by New York Attorney General Letitia James.
The attorney general's office said its investigation found the companies sought payments that were no longer legally collectible in foreclosure cases involving long-defaulted mortgages.
The companies include BCMB1 Trust; First Age, LLC; NS194, LLC; Second Start, LLC; Southern MBA Trust; and affiliates. Beginning in 2019, the debt buyers collectively acquired more than 3,000 so-called zombie mortgages in New York and filed more than 140 foreclosure lawsuits, according to the investigation.
Most of the loans were second mortgages originating before the 2008 financial crisis. Some homeowners had modified their primary mortgages while holders of the second mortgages stopped trying to collect as property values fell, the office said.
The attorney general said those second loans sometimes went years without statements or other communications, leaving homeowners unable to make payments or resolve the debt while they continued paying their primary mortgages.
The investigation found that many foreclosure lawsuits demanded the full principal balance and interest reaching back as far as 12 years. The office said New York's statute of limitations prevents lenders from collecting past-due loan payments more than six years old.
The companies must pay $240,000 in penalties and more than $242,000 in restitution to consumers who paid or agreed to pay expired debt. They must also remove demands for expired payments from ongoing foreclosure cases and are barred from seeking those payments in the future.
James said homeowners should not face losing their homes over mortgage payments whose collection period has expired.
Homeowners who believe they have faced an improper foreclosure can file a complaint with the attorney general's Consumer Frauds and Protection Bureau through the office's website or call 1-800-771-7755.
File photo of New York Attorney General Letitia James.
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