Lone Star-Backed Lender Faces Probe by N.Y. Attorney General

  • State official received surge of complaints about lender
  • Caliber's practices described as `predatory' by labor union

A lender backed by private equity firm Lone Star Funds is under scrutiny by New York Attorney General Eric Schneiderman amid union allegations it may be using predatory practices in its mortgage business.

The company, Caliber Home Loans Inc., has been the subject of a surge of complaints to Schneiderman’s office, said spokesman Matt Mittenthal. The attorney general is looking into whether the firm’s servicing practices violate U.S. Consumer Financial Protection Bureau rules, he said.

Texas-based Caliber offers home loans and refinancing options, including loans of as much as $2.5 million, according to its website. It also services the loans. Dallas-based Lone Star, founded by billionaire John Grayken, manages about $60 billion.

The complaints involve issues similar to those which led to a joint federal and state legal settlement with five banks and mortgage servicers in 2012, according to Mittenthal. Those included foreclosure abuses, delays in production of documents, and poor communication with borrowers.

Housing advocates and the labor union Unite Here have been critical of Caliber. Unite Here has described the company’s practices as “predatory,” and said that growth in the firm’s portfolio has been fueled by acquisitions of nonperforming loans from government-supported entities like Fannie Mae and Freddie Mac.

Jed Repko, a spokesman for Lone Star, declined to comment on the New York probe.

Last year, Lone Star won $3.9 billion worth of soured home loans at auction from the Department of Housing and Urban Development. At the time, the agency said it was the “most competitive sale to date” for its pools of home loans. HUD was selling loans previously insured by the Federal Housing Administration in an effort to improve the program’s finances.

Schneiderman has brought several cases against financial firms over mortgage practices. The New York official co-chaired a joint federal-state working group which reached multibillion-dollar settlements with lenders including Bank of America Corp. and JPMorgan Chase & Co.

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