BOSTON (Legal Newsline) - An agreement between Massachusetts Attorney General Martha Coakley's office and the Texas-based American Home Mortgage Servicing, Inc., will provide benefits to approximately 8,200 Massachusetts borrowers with loans originated by Option One Mortgage Corp., and H&R Block Mortgage Corp.

Those loans are the subject of a June 2008 lawsuit filed by Coakley, which alleges that Option One and H&R Block Mortgage originated the risky subprime loans with reckless disregard for the ability of borrowers to afford their loan payments. That practice was a significant contributor to Massachusetts' current foreclosure crisis, she said.

AHMSI, which purchased the right to service the Option One and H&R Block Mortgage Loans in April 2008, will be required under the agreement, filed in Suffolk Superior Court, to provide affordable loan modifications to certain borrowers who fall behind on their mortgage payments.

As a result of AHMSI's purchasing of the servicing rights, it was named as a defendant in Coakley's ongoing enforcement action and became subject to certain obligations under a Nov. 2008 preliminary injunction. That injunction, issued by the Suffolk Superior Court, limited
the defendant's ability to foreclose on the loans originated by Option One and H&R Block Mortgage.

"Our office continues to work to protect homeowners from the fallout of the subprime lending crisis in Massachusetts, and to assist those homeowners who fell victim to unfair and deceptive lending practices to stay in their homes," Coakley said.

"Our agreement with AHMSI is another step toward that goal, and it will provide much-needed relief to thousands of homeowners. As I said in testimony to Congress earlier this year, I believe that loan modifications are key to stemming the tide of foreclosures in our state and across the nation."

Borrowers holding Option One and H&R Block Mortgage Loans that are serviced by AHMSI, under the agreement, will receive a number of benefits, including loan modifications for eligible borrowers unable to make their scheduled payments who are more than 45 days past due on their mortgage payments. AHSMI will modify those loans to provide borrowers affordable monthly
mortgage payments.

Relocation payments of between $3,000 and $7,500 for delinquent borrowers who do not qualify for loan modifications will be made available, as will alternatives to foreclosure, such as deeds-in-lieu of foreclosures.

The Attorney General's Office will also be given opportunities to object to foreclosures and denials of loan modifications, including a new requirement that AHMSI obtain court approval before foreclosing upon a loan where AHMSI and the attorney general's office cannot resolve an objection.

No allegations were made of loan origination misconduct by AHMSI in Coakley's complaint and the company cooperated with Coakley in reaching this agreement.

Coakley's litigation with Option One, H&R Block Mortgage, Block Financial Corp. and their parent company, H&R Block, Inc., is ongoing and expected to go to trial in 2010.