New York Attorney General Eric Schneiderman’s office is investigating Caliber Home Loans after receiving numerous consumers complaints about its loan servicing practices.


The attorney general’s office would not reveal the nature of the investigation. Caliber Home Loans, owned by the private equity giant Lone Star Funds, has grown quickly in the past two years, with mortgages under management at about 200,000 in late 2013 compared with the current total of approximately 327,500, according to the New York Times. The growth has been fueled by originations and the acquisitions of tens of thousands of delinquent loans.The company has faced scrutiny from industry advocates and lawyers who charge it’s too quick to foreclose on delinquent borrowers. Critics also have taken issue with Caliber's standard loan modification that temporarily cuts a borrower’s payments for five years but then reverts back to the original payment terms in the sixth year, often with all the deferred payments added to the back end of the loan.

The critics contend the temporary modifications merely enable Caliber to begin collecting payments on a loan that has been delinquent for many months or years, but provide no permanent relief to a borrower whose income has declined because of a financial crisis.

Schneiderman's office has been actively reviewing the mortgage industry. Last month it reached a more than $400,000 settlement in a mortgage "rescue" scam that resulted in 14 New York homeowners losing their deeds and equity.

It also has taken aim  at mortgage redlining, an illegal tactic that denies mortgages based on the racial makeup of communities and steers minority borrowers into higher-cost loans.

The Justice Department reports redlining remains prevalent three years after the agency forced several large banks into landmark settlements cracking down on the practice.

"Based on what is on my docket right now, stayed tuned," Steven Rosenbaum, chief of housing and civil enforcement at DOJ's civil rights division, said last month during a fair-housing conference. "There are still lenders who seem to think it is OK to steer minority borrowers to certain loan officers or certain brokers who they know will charge more."

Bank of America agreed to a $335 million settlement in 2012 for alleged discriminatory lending practices and steering by Countrywide Home Loans, which B of A acquired in 2008. Rosenbaum said the Justice Department has distributed 91% of the settlement monies to the victims of those lending practices.

That same year, Wells Fargo agreed to a $184 million settlement for its alleged pattern and practice of discrimination against African-American and Hispanic borrowers from 2004 through 2009. Rosenbaum said 98% of those settlement funds have been distributed to victims.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.