Massachusetts AG Settles with Mortgage Servicer over “Zombie” Mortgages

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  • Massachusetts AG Andrea Campbell settled with Franklin Credit Management Corporation (Franklin Credit), to resolve allegations that the mortgage servicer violated the commonwealth’s foreclosure-prevention law and debt collection regulations.
  • According to the settlement, Franklin Credit, in servicing “zombie” second-lien mortgages—mortgages which became unsecured debt subject to collection following foreclosure of a first-lien mortgage—allegedly failed to timely communicate with borrowers, failed to follow required processes regarding borrowers’ requests for loan modifications, misinformed borrowers about whether their debts had been accelerated, and excessively contacted borrowers regarding debts, among other things.
  • Under the terms of the settlement, Franklin Credit must pay $300,000 in civil penalties, cease collection efforts on mortgage loans in Massachusetts, and refrain from transferring or selling these loans, relieving $10 million in debt for affected borrowers, among other relief.
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